| Summary: | 碩士 === 嶺東科技大學 === 經營管理研究所 === 99 === Foreign brokerages have been permitted to invest in Taiwan since 1991. Generally, investors believe foreign brokerages have more professional knowledge than local brokerages for they normally concentrate on fewer industries. However, there was no objective measure in past literature to calculate the industry specialty of local and foreign brokerages. This paper refers to the Herfindahl Index (HI) of Sonney (2009) to compare industry specialty between local and foreign brokerages, then divides the period into two sub-periods: earlier and later. It examines recommendation performances of local and foreign brokerage before and after the financial turmoil.
The sources of samples are from the Taiwan Economics Journal (TEJ). The study period is from March 2007 to October 2010. The samples include 27 brokerages issuing 18,207 short-term investment recommendations and 4,298 recommendation changes for 559 companies in 28 industries. First, the results show that both local and foreign brokerages have recommendation performances, but foreign ones are better. In regard to industry specialty measured by HI, foreign brokerages are more consistent than local ones. In addition, only local brokerages with industry specialty have recommendation performances. Next, foreign brokerages perform well in the earlier sub-period but local ones do better in the later sub-period. Finally, the loadings on the size factor in the four-factor regression suggest that brokerages with higher industry specialty tend to buy small companies; meanwhile, ones with lower industry specialty prefer to buy big companies. The loadings on the book-market ratio factor show that all foreign brokerages tend to buy value stocks; whereas local ones with higher industry specialty like to buy growth stocks, but ones with lower industry specialty prefer to buy value stocks. The loadings on the momentum factor show that foreign brokerages tend to pursue the winners and sell the losers, while local brokerages take the opposite strategy.
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