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

Hyuk Choe, Bong-Chan Kho and René Stulz

No 10502, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F36 G12 (search for similar items in EconPapers)
Date: 2004-05
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Note: IFM AP
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Citations: View citations in EconPapers (17)

Published as Hyuk Choe & Bong-Chan Kho & René M. Stulz, 2005. "Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(3), pages 795-829.

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Journal Article: Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea (2005)
Working Paper: Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea (2004)
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