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Foreign and Local Institutional Ownership and the Speed of Price Adjustment


  • They thank an anonymous referee and the editor for many valuable comments which improve the paper greatly.

* Address for Correspondence: Kee H. Chung, The M&T Chair in Banking and Finance, Department of Finance and Managerial Economics, School of Management, SUNY at Buffalo, Buffalo, NY 14260, USA. e-mail:


Abstract:  This paper examines the relation between the speed of price adjustment and stock ownership by foreign and local institutional investors using data from the Korean stock market. We show that returns of stocks with high foreign institutional ownership lead returns of stocks with low foreign institutional ownership, especially after foreign ownership restriction is lifted. Likewise, returns of stocks with high local institutional ownership lead returns of stocks with low local institutional ownership. These results support the idea that foreign institutional (local institutional) investors have faster access to or processing power of new information than local institutional (local individual) investors.