We analyze how foreign ownership relates to the short-term pricing efficiency of common stocks listed on the Korea Stock Exchange. We find that stocks with greater foreign holdings are priced less efficiently. This result is robust to different efficiency measures, estimation methods, and reverse causality concerns. Our evidence suggests that foreign trading deters price corrections, at least in the short term, and thus, has a negative effect on utilitarian traders. Our findings in relation to potential losses provide new insights into the downside risk of financial liberalization at the market microstructure level.

中文翻译：

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外国交易者如何影响股票定价效率？来自韩国的基于微观结构的证据*

我们分析了外资所有权与韩国证券交易所上市普通股的短期定价效率之间的关系。我们发现外国持股较多的股票定价效率较低。这个结果对于不同的效率测量、估计方法和反向因果关系是稳健的。我们的证据表明，对外贸易至少在短期内会阻止价格调整，因此对功利主义交易者产生负面影响。我们关于潜在损失的发现为市场微观结构层面金融自由化的下行风险提供了新的见解。