Abstract
This paper examines the impact of policy–related information uncertainty (PIU) on the trading behaviour of foreign institutional investors (FII) in emerging equity markets. We undertake an empirical analysis using transaction–level data and exploiting a quasi–natural experiment set–up provided by an unexpected tax–related policy announcement in the Indian equity market that generated a period of policy uncertainty. Our results show that FII reacts quickly and withdraws, on average, investments worth at least 0.713 basis points of the market capitalization (USD 0.17 million) per day for average equity during the PIU period. However, the sentiments of the FII turn significantly positive when the concerned PIU is eradicated. The results suggest that policymakers, particularly in capital constraint emerging markets, should be highly conscious of generating PIU if they wish to attract and retain overseas investors.
| Original language | English |
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| Title of host publication | 12th International Conference of the Financial Engineering and Banking Society |
| Publisher | Financial Engineering and Banking Society (FEBS) |
| Publication status | Published - 1 Jun 2023 |
| Event | 12th International Conference of the Financial Engineering and Banking Society: Stability and Risk in Banking and Financial Markets - Mediterranean Agronomic Institute of Chania, Chania, Greece Duration: 1 Jun 2023 → 4 Jun 2023 https://www.febsociety.org/conferences/international-conferences/12th-international-conference/overview/ |
Conference
| Conference | 12th International Conference of the Financial Engineering and Banking Society |
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| Abbreviated title | FEBS 2023 |
| Country/Territory | Greece |
| City | Chania |
| Period | 1/06/23 → 4/06/23 |
| Internet address |
Keywords
- policy–related information uncertainty
- foreign institutional investors
- emerging markets
- transaction level data
- quasi–natural experiment