Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market

Timo Korkeamäki; Nader Virk; Haizhi Wang; Peng Wang

doi:10.1016/j.irfa.2019.05.011

Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market

Timo Korkeamäki^*, Nader Virk, Haizhi Wang, Peng Wang

^*Corresponding author for this work

Not published at Aalto University

Research output: Contribution to journal › Article › Scientific › peer-review

3 Citations (Scopus)

Abstract

We analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. We find that foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market. Rather than following the diversified portfolio approach, they follow investment strategies that focus on a limited number of firm features.

Original language	English
Pages (from-to)	190-203
Number of pages	14
Journal	INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
Volume	64
DOIs	https://doi.org/10.1016/j.irfa.2019.05.011
Publication status	Published - 1 Jul 2019
MoE publication type	A1 Journal article-refereed

Keywords

China
Foreign investor
Institutional investor
Qualified foreign institutional investor (QFII) scheme

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10.1016/j.irfa.2019.05.011

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title = "Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market",

abstract = "We analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. We find that foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market. Rather than following the diversified portfolio approach, they follow investment strategies that focus on a limited number of firm features.",

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N2 - We analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. We find that foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market. Rather than following the diversified portfolio approach, they follow investment strategies that focus on a limited number of firm features.

AB - We analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. We find that foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market. Rather than following the diversified portfolio approach, they follow investment strategies that focus on a limited number of firm features.

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