This thesis investigates the impact of foreign shareholding on the investment performance and liquidity of the individual share index so as to serve as the investors' investing basis in the stock market.
Since the individual stock future went public on February, 2010, it has gradually occupied a decisive position in the financial market in Taiwan. This thesis adopted the stock with single stock futures contracts in Taiwan's stock market from 2010 to 2014, to examine the influence of foreign shareholding on the investment performance and liquidity. It is found that among samples with high foreign shareholding, as foreign shareholding increases, the risk-adjusted abnormal return in the following month raises dramatically. Meanwhile, the other samples are free of such influence. Nevertheless, foreign shareholding is indeed influential, especially for the volume of transaction in the following month. It is therefore deducted that it is likely for foreign investment to cross hedge by individual stocks with single stock futures contracts. Accordingly, this research claims that foreign shareholding can serve as the indicator for the investors to observe variation of the transaction volume in the stock market in Taiwan.
