Policy information uncertainty and trading behavior of foreign institutional investors

Chandra Thapa*, Biwesh Neupane, Dr. Chaman Shrestha

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

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Abstract

Using transaction-level data and exploiting a credible quasi-natural experiment set-up provided by India's unexpected tax-related policy announcement, we examine the impact of policy-related information uncertainty (PIU) on the trading behaviour of foreign institutional investors (FII). We find that FII reacts quickly and withdraws significant investments during the PIU period. However, the sentiments of the FII turn significantly positive when policymakers eradicate the concerned PIU. 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 languageEnglish
Title of host publicationProceedings of the 29th Annual Conference of Multinational Finance Society
PublisherMultinational Finance Society
Publication statusPublished - 2 Jul 2023
Event29th Annual Conference of Multinational Finance Society - Paphos, Cyprus
Duration: 2 Jul 20235 Jul 2023
https://www.mfsociety.org/page.php?pageID=32

Conference

Conference29th Annual Conference of Multinational Finance Society
Country/TerritoryCyprus
CityPaphos
Period2/07/235/07/23
Internet address

Keywords

  • policy–related information uncertainty
  • foreign institutional investors
  • emerging markets
  • transaction level data
  • quasi–natural experiment

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