- FII inflows into a domestic markets (16 emerging markets) has no statistical significance on domestic equity prices.
- Herding (measured by autocorrelation) is observed on longer terms (around 20 days) as opposed to short term (around 1 week). i.e., Investors chase returns in cases where there is a clearly observed profit taking opportunity. Is this because large investors actively influence opinions -- on Bloomberg chats or other trading information circuits.
- Causality is difficult to determine. i.e., Does inflow volatility cause returns volatility? Or is it the other way around?
Wednesday, October 17, 2007
Does FII sway Domestic Equity Markets?
Yes. No. Maybe... says IMF. Using high-frequency data, some of the conclusions are: