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Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea

Author

Listed:
  • Choe, Hyuk

    (Seoul National U)

  • Kho, Bong-Chan
  • Stulz, Rene M.

    (Ohio State U)

Abstract
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.

Suggested Citation

  • Choe, Hyuk & Kho, Bong-Chan & Stulz, Rene M., 2004. "Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea," Working Paper Series 2004-6, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2004-6
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    File URL: http://www.cob.ohio-state.edu/fin/dice/papers/2004/2004-6.pdf
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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