We study the impact of foreign institutional investors on price efficiency with firm-level international data. Using MSCI index inclusion and the U.S. Jobs and Growth Tax Relief Reconciliation Act as exogenous shocks to foreign ownership, we show that greater foreign ownership increases stock...

We study the impact of foreign institutional investors on global capital allocation and welfare using novel firm-level international data. Using MSCI index inclusion as an exogenous shock to foreign ownership, we show that greater foreign ownership leads to more informative stock prices and this...