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

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 resul...

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Bibliographic Details
Published in:International review of financial analysis 2019-07, Vol.64, p.190-203
Main Authors: Korkeamäki, Timo, Virk, Nader, Wang, Haizhi, Wang, Peng
Format: Article
Language:English
Subjects:
China
Foreign investor
Institutional investor
Qualified foreign institutional investor (QFII) scheme
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Summary: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.
ISSN:1057-5219
1873-8079
DOI:10.1016/j.irfa.2019.05.011