English, Article edition: The Dynamic Relationship between the Investment Behavior and the Morgan Stanley Taiwan Index: Foreign Institutional Investors' Decision Process Mei-Ling Chen; Kai-Li Wang; Ya-Ching Sung; ...

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Physical Description
  • article
Language
  • English

Edition details

Title
  • The Dynamic Relationship between the Investment Behavior and the Morgan Stanley Taiwan Index: Foreign Institutional Investors' Decision Process
Author
  • Mei-Ling Chen
  • Kai-Li Wang
  • Ya-Ching Sung
  • Fu-Lai Lin
  • Wei-Chuan Yang
Physical Description
  • article
Notes
  • This research employs VAR models, impulse response function, forecast error variance decomposition and bivariate GJR GARCH models, to explore the dynamic relationship between foreign investment and the MSCI Taiwan Index (MSCIâTWI). The estimations of the VAR, impulse-response functions and predicted error variance decomposition tests show that stronger feedback effects exist between net foreign investment and MSCIâTWI. In particular, our results demonstrate that the MSCIâTWI has the greatest influence over the decision-making processes of foreign investors. Also, we see that exchange rates exert a negative influence on both net foreign investment dollars and the MSCIâTWI. In addition, USâTaiwan interest rate difference has a positive influence on net foreign investment dollars and a negative influence on the MSCIâTWI. As for asymmetric own-volatility transmission, negative shocks in the MSCIâTWI tend to create greater volatility for itself in the following period than positive shocks. Our research indicates an asymmetric information transmission mechanism from net foreign investment to MSCIâTWI markets. Moreover, the estimated correlation coefficient shows that MSCIâTWI and net foreign investment dollar have a positive contemporaneous correlation.
  • Net foreign investment dollar, MSCIâTWI, exchange rates, interest rate, bivariate GJR GARCH models, JEL Classifications: C32, JEL Classifications: G15
  • RePEc:wsi:rpbfmp:v:10:y:2007:i:03:p:389-413
Language
  • English
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