The impact of foreign trades on emerging market liquidity

Yessy Peranginangin, Akbar Z. Ali, Paul Brockman, Ralf Zurbruegg

Research output: Contribution to journalArticleResearchpeer-review

14 Citations (Scopus)


We examine the transmission mechanisms through which foreign trades affect commonality in liquidity in an emerging stock market. Trade-level data from the Indonesian Stock Exchange allow us to examine the impact of aggressive foreign trades on commonality in liquidity. Our results show that these trades contribute significantly to the price discovery process as well as to increasing commonality in liquidity. We find that the price discovery impact of aggressive foreign trading provides the mechanism through which foreign investor trading affects emerging market liquidity dynamics. Overall, our study shows that foreign investor trading is a double-edged sword.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalPacific Basin Finance Journal
Publication statusPublished - Dec 2016


  • Commonality in liquidity
  • Financial crisis
  • Foreign investors
  • Price discovery

Cite this