A study of the relationship between foreign ownership and stock price efficiency: evidence from the Taiwan stock market

• Main Authors: Liu, Ya Wen, 劉雅雯
• Other Authors: 周冠男
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/85882180777790995435

碩士 === 國立政治大學 === 財務管理研究所 === 105 === Various benefits of opening a market to foreign investors are indicated in prior studies. However, few studies point out whether foreign investors improve efficiency of stock prices. Using a large sample of TWSE-listed stocks over the period 2007 to 2016, we investigate the relation between foreign ownership and price efficiency. In our analysis, we use the first-order return autocorrelations, which should be zero if prices follow a random walk to compute price efficiency. After controlling for the change in foreign ownership, firm size, stock price and stock liquidity, finally, we find that stocks with greater foreign ownership are not priced efficiently whether in overall market or in each level of foreign ownership and also in different industries. In summary, these results suggest that the foreign investors could not improve price efficiency on the Taiwan stock market.