Does Foreign Investor Base Concentration Affect Stock Price Volatility?

Tae-Hoon Lim

Abstract

This paper investigates the effect of foreign investor base concentration on stock price volatility. Concentrated foreign investor base is hypothesized to increase strategic complementarities among investors and therefore increase price volatilities for stocks with high foreign investor participation. Empirical analysis of the relationship between the concentration of foreign investor base and the volatility of stock prices shows that the foreign investor base concentration is positively associated with stock price volatility for the stocks with high foreign turnover.

Keywords Price volatility․Foreign ownership․Investor base․Institutional ownership

1.Tae-Hoon Lim