An Empirical Study on the Linkage between Foreign Investors' Holding Percentages and Daily Changes in Portfolio Return/Turnover

Research has shown securities returns exhibit a day-of-the-week anomaly. The cause of this effect is, however, controversial. Some argue that the trading activities of individual investors are the primary reason behind it, while others deem securities which are dominated more by institutional rather than individual investors display the weekend anomaly more pronouncedly. Trying to provide preliminary information in this topic, this paper examines the associations between foreign investors' holding ratios and daily changes in portfolio return/turnover on Taiwan Stock Exchange. The results, similar to what observed in the U.S., indicate an influential role played by foreign institutional investors in Taiwan. This outcome is related to the firm-size effect. In addition, some interesting phenomena have also been found in the paper.