earticle

영어

This study examines whether foreign investors increase informational efficiency in the Korean stock market from January 1999 to June 2013. Bae, Ozoguz, Tan, and Wirjanto (2012) document that the beneficial effect of foreigners facilitating information reflection on stock prices in other Asian markets is not observed in the Korean market even though the Korean market has a large amount of US equity holding. We reinvestigate the role of foreign investors in the Korean equity market by defining foreign investors’ investibility as the normalized trading volume of foreign investors. We estimate how much faster the reflection of global or domestic information becomes when foreign investibility increases. In the results of our cross-sectional analysis, unlike Bae et al., foreigners’ trades are shown to increase the informational efficiency for both global and local market information. In particular, in export-import companies that are expected to be more sensitive to the global market, the improvement in informational efficiency is significant when foreign investiblity increases. Our results prove that foreign investors play a beneficial role in the Korean equity market facilitating information transmission.