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The Impact of Foreign Ownership on Stock Volatility in Indonesia
Author(s) -
Wang Jianxin
Publication year - 2013
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12022
Subject(s) - foreign ownership , volatility (finance) , business , monetary economics , indonesian , stock (firearms) , volatility swap , economics , international economics , financial system , implied volatility , foreign direct investment , finance , macroeconomics , geography , philosophy , archaeology , linguistics
This study documents the negative relationship between foreign ownership and the future volatility of Indonesian stocks. The calming effect of foreign ownership is present before, during, and after the Asian financial crisis. It is independent of gross and net foreign trading and the stock's historical volatility. The effect increases with the level of foreign holdings. The findings are contrary to the volatility impact of institutional ownership in developed markets, and indicate the presence of different economic mechanisms leading to the opposite volatility impact from foreign ownership and foreign trading.