Do Domestic Investors Have an Edge?: The Trading Experience of Foreign Investors in Korea, Issue 10502
National Bureau of Economic Research, 2004 - Investments, Foreign - 47 pages
We investigate whether domestic investors have an edge over foreign investors in trading domestic stocks.Using Korean data, we show that foreign money managers pay more than domestic money managers when they buy and receive less when they sell for medium and large trades. The sample average daily trade-weighted disadvantage of foreign money managers is of 21 basis points for purchases and 16 basis points for sales. There is also some evidence that domestic individual investors have an edge over foreign investors. The explanation for these results is that prices move more against foreign investors than against domestic investors before trades.
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abnormal return Avg of daily basis points Buy BIA coefficient compared to domestic daily median trade David Laibson difference in price difference in trade Difference of Buy Difference of Sell disadvantage of foreign domestic and foreign domestic individual investors domestic investors domestic money managers evidence that foreign foreign institutions foreign investors sell foreign investors trade foreign money managers high trade value information asymmetries intensive buying intensive selling intensive trading interval intra-day investor type investors relative Jean Tirole Korea Stock Exchange KOSPI large trades momentum trading mutual funds number of stocks openmg Panel performance periods of intensive permanent impact permanent price impact pooled regression prices move prices than domestic quintile Ramadorai relative to domestic sample period Seasholes Sell BIA Seoul National University small trades stock characteristics stocks per day Stulz t-stat trade intensively trade price trade value compared trades by foreign trading by domestic type of investors variables worse prices