Foreign portfolio investors before and during a crisis

Using a unique data set, we study the trading behavior of foreign portfolio investors in Korea before and during the currency crisis. The central mess age is that investors in different categories have different trading patter ns. For example, foreign investors outside Korea are more likely to engage in positive feedback trading strategies and are more likely to engage in he rding than the branches I subsidiaries of foreign institutions in Korea or foreign individuals living in Korea. This difference in trading behavior is possibly related to the difference in their information. This paper sugges ts that it may be worth exploring policies that can encourage foreign inves tors to acquire more information (e.g. by setting up a branch or a subsidia ry in the emerging country). (C) 2002 Elsevier Science B.V. All rights rese rved.