Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market?
This paper examines the impact of gross foreign equity inflows on aggregate liquidity of the Malaysian stock market using newly assembled foreign trading data and the best performing bid-ask spread proxy. Employing vector autoregression, we discover a one-way causality from gross inflows to aggregat...
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| Format: | Article |
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Elsevier
2018
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| _version_ | 1825721693086154752 |
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| author | Liew, Ping Xin Lim, Kian Ping Goh, Kim Leng |
| author_facet | Liew, Ping Xin Lim, Kian Ping Goh, Kim Leng |
| author_sort | Liew, Ping Xin |
| collection | UM |
| description | This paper examines the impact of gross foreign equity inflows on aggregate liquidity of the Malaysian stock market using newly assembled foreign trading data and the best performing bid-ask spread proxy. Employing vector autoregression, we discover a one-way causality from gross inflows to aggregate liquidity, and foreign investors erode liquidity of the Malaysian stock market. Additional analyses reveal that uncertainties in the U.S. markets negatively affect aggregate liquidity through the flows of foreign institutions, whose positive feedback trading destabilizes the local bourse. Despite the shocks, there is sufficient liquidity provision from local state-backed institutional funds and local proprietary day traders. |
| first_indexed | 2024-03-06T05:54:14Z |
| format | Article |
| id | um.eprints-21467 |
| institution | Universiti Malaya |
| last_indexed | 2024-03-06T05:54:14Z |
| publishDate | 2018 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | um.eprints-214672019-06-17T04:07:52Z http://eprints.um.edu.my/21467/ Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? Liew, Ping Xin Lim, Kian Ping Goh, Kim Leng HG Finance This paper examines the impact of gross foreign equity inflows on aggregate liquidity of the Malaysian stock market using newly assembled foreign trading data and the best performing bid-ask spread proxy. Employing vector autoregression, we discover a one-way causality from gross inflows to aggregate liquidity, and foreign investors erode liquidity of the Malaysian stock market. Additional analyses reveal that uncertainties in the U.S. markets negatively affect aggregate liquidity through the flows of foreign institutions, whose positive feedback trading destabilizes the local bourse. Despite the shocks, there is sufficient liquidity provision from local state-backed institutional funds and local proprietary day traders. Elsevier 2018 Article PeerReviewed Liew, Ping Xin and Lim, Kian Ping and Goh, Kim Leng (2018) Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? The North American Journal of Economics and Finance, 45. pp. 161-181. ISSN 1062-9408, DOI https://doi.org/10.1016/j.najef.2018.02.007 <https://doi.org/10.1016/j.najef.2018.02.007>. https://doi.org/10.1016/j.najef.2018.02.007 doi:10.1016/j.najef.2018.02.007 |
| spellingShingle | HG Finance Liew, Ping Xin Lim, Kian Ping Goh, Kim Leng Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title | Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title_full | Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title_fullStr | Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title_full_unstemmed | Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title_short | Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market? |
| title_sort | foreign equity flows boon or bane to the liquidity of malaysian stock market |
| topic | HG Finance |
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