Foreign ownership and the informational efficiency of Malaysian stocks

• Main Author: Chang, Kwok Boon
• Format: Thesis
• Language: English; English
• Published: 2012
• Subjects: HG4551-4598 Stock exchanges
• Online Access: https://eprints.ums.edu.my/id/eprint/38505/2/24%20PAGES.pdf; https://eprints.ums.edu.my/id/eprint/38505/1/FULLTEXT.pdf; https://eprints.ums.edu.my/id/eprint/38505/
• Institution: Universiti Malaysia Sabah

Using the foreign ownership data for 602 firms listed on Bursa Malaysia over the sample period 2002-2009, this study examines the contribution of foreign investors to stock price efficiency. Defining informational efficiency in terms of the speed of adjustment to common information, the paper computes stock price delay measures with respect to local and global market-wide news. The novel finding from this thesis is the existence of a LI-shaped relationship between total foreign ownership and stock price delay, and hence implies the presence of optimality in foreign ownership. More specifically, informational efficiency improves until foreign ownership reaches approximately 25% to 28%, and then it begins to decline. Further analysis finds that the significant nonlinear effect in total foreign ownership is actually driven by foreign nominees.