This paper examines the impact of foreign investors on stock returns in Korea from November 30, 1996 to the end of 1997 using order and trade data. We “and strong evidence of positive feedback trading and herding by foreign investors before the period of Korea’s economic crisis. During the crisis period, herding falls, and positive feedback trading by foreign investors mostly disappears. We “nd no evidence that trades by foreign investors had a destabilizing elect on Korea’s stock market over our sample period. In particular, the market adjusted quickly and eciently to large sales by foreign investors, and these sales were not followed by negative abnormal returns. 1999 Elsevier Science S.A. All rights reserved.