Abstract
This study investigates whether foreign investors cause abnormal information by jump process in the Taiwanese stock market during before and after relaxation of the restrictions on QFII investors on 2 October 2003 (pre- and post-QFII). By conducting further analysis, this study conducts detailed analysis and explores how abnormal information and QFII behaviour are related by performing correlation and Granger causality analyses. This study concludes that the release of restrictions on QFII has been extremely helpful in improving the domestic investment environment and stabilizing the Taiwanese stock market.
Notes
1 Qualified Foreign Institutional Investors (QFII) here refers to foreign professional investment institutions, which can be further classified into five categories, namely insurance companies, banks, securities, fund management organizations and other investment units, e.g. mutual funds, retirement funds, government funds, mercy funds, etc.
2 Foreign investors comprised 0.1% of total investment in the Taiwan stock market in 1990, at which time individual domestic investors dominated the market with 96.7%. The share of foreign investors increased to 8% by 2003, with that of domestic individual investors decreasing to 79% representing a major change.
3 Nonparametric analysis need not the normality of data, and then is suitable distributed the unknown.
4 Spearman's rank correlation is satisfactory for testing a null hypothesis of independence between two variables but it is difficult to interpret when the null hypothesis is rejected. Kendall's rank correlation improves upon this by reflecting the strength of the dependence between the variables being compared.
5 Total variance is .
6 Ratio of jump variance to total variance, that is
7 On average, the trading volume of foreign capital in the Taiwanese stock market increased 312% after 2003, compared with before 2003.