Do Domestic Investors Have an Edge?: The Trading Experience of Foreign Investors in Korea"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"--NBER website |
Common terms and phrases
50 million won avgbas basis points bid-ask spread Buy B/A Buy price ratio coefficient compared to domestic ctc5 cumulative mean-adjusted return daily median trade daily observations required David Laibson difference in price difference in trade Difference of Buy Difference of Sell disadvantage of foreign domestic individual investors domestic institutions domestic investors domestic money managers F-test Financial Economics foreign investors trade foreign money managers H₂ imbalances information asymmetries intensive buying intensive selling interval intra-day investor type Jean Tirole Korea Stock Exchange KOSPI KOSPI index large trades momentum trading number of stocks Panel performance periods of intensive permanent impact permanent price impact pooled regression price ratio differences quintile Ramadorai ret Mean-adj ret sample period Seasholes Sell B/A Sell price ratio sell trades Seoul National University stock characteristics stock-day stocks per day t-stat T-statistics Table trade intensively trade size 000 trades by foreign trading by domestic type of investors variables worse prices