Do Local Investors Exhibit Smart Value Investment? Empirical Evidence from India

Chauhan, Ajay Kumar; Chaklader, Barnali

doi:10.1177/0972150920915330

Cited by 9 publications

(17 citation statements)

References 29 publications

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“…Empirical evidence suggests that higher frequencies tend to return more evidence in support of their feedback trading, thus denoting that foreign funds employ such strategies for short-horizon investments. On balance, most studies confirm foreign funds' momentum trading in emerging markets, including Brazil (Gonçalves and Eid, 2017), India (Arora, 2016;Hiremath and Kattuman, 2017;Chauhan and Chaklader, 2020), Malaysia (French, 2017;Liew et al, 2018), South Korea (Kim and Wei, 2002b;Choe et al, 2005;Oh et al, 2008;Kim et al, 2009;Jeon and Moffett, 2010;Hong and Lee, 2011;Ikizlerli et al, 2019), Taiwan (Chang, 2010;Chiang et al, 2012;Liao et al, 2013;Hsieh, 2013), Thailand (Phansatan et al, 2012;French, 2017) and Vietnam (Vo, 2017). As per developed markets, similar evidence surfaces in Finland Keloharju, 2000, 2001;Do et al, 2008), Germany (Baltzer et al, 2019), Japan (Karolyi, 2002;Kamesaka et al, 2003;Hood et al, 2013) and Sweden (Dahlquist and Robertsson, 2004); this pattern is also confirmed in crossmarket studies at the regional (Kaminsky et al, 2004;Hsieh et al, 2011;Chakraborty and Kakani, 2016) and global (Froot et al, 2001;Choi and Skiba, 2015;Kanas and Karkalakos, 2017) levels.…”

Section: Empirical Evidencementioning

confidence: 83%

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

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PurposeThe purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors' feedback trading, one of the most popular trading patterns observed historically in financial markets. Specifically, the authors aim to synthesize the diverse theoretical approaches to feedback trading in order to provide a detailed discussion of its various determinants, and to systematically review the empirical literature across various asset classes to gauge whether their feedback trading entails discernible patterns and the determinants that motivate them.Design/methodology/approachGiven the high degree of heterogeneity of both theoretical and empirical approaches, the authors adopt a semi-systematic type of approach to review the feedback trading literature, inspired by the RAMESES protocol for meta-narrative reviews. The final sample consists of 243 papers covering diverse asset classes, investor types and geographies.FindingsThe authors find feedback trading to be very widely observed over time and across markets internationally. Institutional investors engage in feedback trading in a herd-like manner, and most noticeably in small domestic stocks and emerging markets. Regulatory changes and financial crises affect the intensity of their feedback trades. Retail investors are mostly contrarian and underperform their institutional counterparts, while the latter's trades can be often motivated by market sentiment.Originality/valueThe authors provide a detailed overview of various possible theoretical determinants, both behavioural and non-behavioural, of feedback trading, as well as a comprehensive overview and synthesis of the empirical literature. The authors also propose a series of possible directions for future research.

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Section: Empirical Evidencementioning

confidence: 83%

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

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“…The budget 2021 was purely growthoriented and thus, we could see a huge influx of foreign capital whereas domestic investors were on a selling spree to book profits. It is reported that FIIs follow a positive feedback trading strategy and DIIs follow a contrarian feedback trading strategy (Sehgal and Tripathi, 2009;Chauhan and Chaklader, 2020). Therefore, it is worthwhile to analyze the behavior depicted by FIIs and DIIs in the equity segment of the Indian capital market around the budget day.…”

Section: Foreign Flows and Domestic Flowsmentioning

confidence: 99%

“…Also, we can see that the trading strategy adopted by FIIs in the pre-and post-budget longterm period does though not have a significant difference at the 5% level but it is significant at the 10% level of significance. Further, it is noticed that foreign investors indulge in making the market returns deviate from their fundamental value by overreacting to the news/shocks/events (Chauhan and Chaklader, 2020;(Ananthanarayan et al, 8-9 June 2009;? ;Dhingra et al, 2016) Table 6 depicts that there exists an insignificant difference in the net investment pattern of DIIs in the pre-and postbudget periods.…”

Section: Foreign Flows and Domestic Flowsmentioning

confidence: 99%

“…Generally, foreign investors are associated with short-termism and are known for booking profits and destabilizing the Indian market. Whereas, domestic investors are concerned with investing in the securities market of India for the long term (Bhanumurthy and Singh, 2013;Chauhan and Chaklader, 2020). Therefore, it is expected that the Budget announcement will impact the institutional flows differently.…”

Section: Introductionmentioning

confidence: 99%

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Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Gupta

Singh

Jain³

2022

RIJBR

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The key purpose of this study is to gauge the effect of yearly union budgets spanning from 2010 to 2021 by observing yields and volatility in the Indian bourse. Overall, 12 union budgets are considered in the Indian scenario. Further, the present work strives to relate the market returns with the investment activities adopted by foreign institutional investors (FII) and domestic institutional investors (DII). The event, i.e., the proclamation of the budget happens on February 1 every year, and therefore 60 trading days which are sub-divided into 30 days before the budget and 30 days after the budget has been analyzed in the study. Moreover, the event window of 60 days has been bifurcated into a period of pre-and post-3 days, pre-and post-15 days, and pre-and post-30 days around the budget. Paired samples T-statistic and F-test have been used in the current study. The results suggest that the medium-term returns are significantly influenced by union budgets. The volatility is greatest in the short-term period after the budget proclamation and it reduces with the increasing time. One startling thing to observe is that falling returns and rising volatility in the short-term period post-budget are due to the selling activities of foreign investors. It is recommended to hold the stocks in the post-budget short-term period irrespective of the falling returns till the long-term to book profits.

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“…A significant contemporaneous relationship was established between FII flows and volatility of stock markets (Lakshmi & Thenmozhi, 2018). FIIs increased volatility in the Indian stock markets by higher inflows during the period of better expected returns (Chauhan & Chaklader, 2020). The impact of FII trading activities on the Indian market volatility was more significant compared to DII (Gahlot, 2019).…”

Section: Review Of Literaturementioning

confidence: 99%

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

Aggarwal

Doifode²,

Tiwary

2021

Vision: The Journal of Business Perspective

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This study examines the relationship that both domestic and foreign institutional net equity flows have with the India stock markets. The motivation behind is the study to examine whether increased net equity investments from domestic institutional investors has reduced the influence of foreign equity flows on the Indian stock market volatility. Our results indicate that only during periods in which domestic equity inflows surpass foreign flows by a significant margin, as seen during 2015–2018, is the Indian stock market volatility not significantly influenced by foreign equity investments. However, during periods of re-emergence of strong foreign net inflows, the Indian market volatility is still being impacted significantly, as has been observed since 2019. Furthermore, we find that both large-scale net buying and net selling by domestic funds increased the stock market volatility as observed during 2015–2018 and COVID-impacted year 2020 respectively. The implications of this study are multi-fold. First, the regulators should discuss with industry bodies before enforcing major structural changes like reconstituting of mutual fund investment mandate in 2017 which forced domestic funds to quickly change portfolio allocation amongst large-cap, mid-cap and small-cap stocks resulting in higher stock market volatility. Second, adequate investor educational and awareness programmes need to be conducted regularly for retail investors to minimize herd behaviour of investing during market rise and heavy redemptions at times of fall. Third, the economic policies should be stable and forward-looking to ensure foreign investors remain attracted to the Indian stock markets at all times.

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Do Local Investors Exhibit Smart Value Investment? Empirical Evidence from India

Cited by 9 publications

References 29 publications

Feedback trading: a review of theory and empirical evidence

Feedback trading: a review of theory and empirical evidence

Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

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