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

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 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

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

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Publisher
Oxford University Press
Copyright
© The Author 2005. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oupjournals.org
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhi028
Publisher site
See Article on Publisher Site

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 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.

Journal

The Review of Financial StudiesOxford University Press

Published: Jun 2, 2005

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