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Do domestic investors have an edge? The trading experience of foreign investors in Korea. (2005)
| Venue: | Review of Financial Studies |
| Citations: | 78 - 4 self |
BibTeX
@ARTICLE{Choe05dodomestic,
author = {Hyuk Choe and Bong-Chan Kho and René M Stulz and Dong Lee and Mark Grinblatt and Campbell Harvey and Maureen O'hara and Andrew Karolyi and Pete Kyle and Toby Moskowitz and Richard Roll and Mark Seasholes and Linda Tesar},
title = {Do domestic investors have an edge? The trading experience of foreign investors in Korea.},
journal = {Review of Financial Studies},
year = {2005},
pages = {795--829}
}
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Abstract
Abstract We exploit a unique dataset to shed new light on the issue of whether domestic investors have an edge over foreign investors in trading domestic stocks by investigating whether foreigners pay more for stocks when they buy and receive less when they sell. Using trade data from Korea from December 1996 to November 1998, we show that the price that foreign investors pay is roughly 0.30 percent higher than the price domestic institutions pay and the price that foreign investors receive is roughly 0.30 percent lower than the price domestic institutions receive for medium and large trades when controlling for firm and stock characteristics as well as contemporaneous market performance; the disadvantage of foreign investors relative to individual investors is much smaller and does not exist for smaller trades. Foreign investors perform more poorly when they trade more intensively, which could be consistent with them being more impatient for larger trades because of liquidity or information reasons. However, there is no evidence that foreign investors have a higher permanent or temporary price impact when they trade intensively. 2
