The effects of abolishing a foreign institutional investment quota in Taiwan

Chun Da Chen*, Yi-Hou Huang, Chih Chun Chen

*Corresponding author for this work

Research output: Contribution to journalArticle

7 Scopus citations

Abstract

Policies regarding the globalization of financial markets have long been investigated with conflicting results. This paper employs an event study approach with the EGARCH process to examine the effects of lifting restrictions on qualified foreign institutional investors in the Taiwanese stock market. The empirical results indicate significant differences in the behavior of stock returns in the electronics, financial, and other nonfinancial sectors, both on and after the abolition of Taiwan's investment quota. In addition, the volatility of stock returns in the electronics sector increases following the event. Foreign ownership provides some additional explanatory power for electronics and other nonfinancial stocks in the short run.

Original languageEnglish
Pages (from-to)74-98
Number of pages25
JournalEmerging Markets Finance and Trade
Volume47
Issue number2
DOIs
StatePublished - 1 Mar 2011

Keywords

  • EGARCH model
  • event study
  • investment policy
  • qualified foreign institutional investor

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