Foreign investors and stocks' volatility: evidence from COVID-19

Purpose - The purpose of this study is twofold: first, to examine the relationship between foreign ownership and stock return volatility and second, to explore how COVID-19 impacts such a relationship.Design/methodology/approach - This empirical research is based on the non-financial firms of the BSE-100 index over the 2013-2022 period. The ordinary least squares, fixed effects and system GMM (Generalized method of moment) techniques are used to analyze the effect of oversea investors on stock return volatility.Findings - Results indicate an inverse association between foreign ownership and stock return volatility. The outcomes of the pre-and during-COVID-19 period show a negative but insignificant relationship between foreign ownership and stock return volatility. These results reflect foreign investors sold their stocks pessimistically, which badly affected the Indian stock market.Originality/value - This study enriches the previous literature by exploring the impact of foreign investors on the stock return volatility of Indian firms. To date, no study has captured the impact of foreign ownership on stock return volatility during the COVID-19 pandemic.