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The Investment Technology of Foreign and Domestic Institutional Investors in an Emerging Market

Ajay Shah () and Ila Patnaik ()

No 2013/090, IMF Working Papers from International Monetary Fund

Abstract: The literature on the investment technology of foreign versus domestic investors has inconclusive results. This paper revisits the question, with a focus on decomposing portfolio performance into asset allocation and security selection. We document signicant differences in exposure to systematic asset pricing factors between foreign and domestic investors. A quasi-experimental strategy is introduced, for comparing security selection after controlling for diferences in asset allocation. Our results show that foreign investors in India do remarkably poorly at security selection.

Keywords: WP; DII investment; DII ownership; firm beta; R&D company; chosen firm; firm characteristic; Institutional Investor; Foreign Investors; Domestic Institutional Investors; bottom quintile company; Asset allocation; Productivity; Asset prices; Stock markets; Production growth; Global (search for similar items in EconPapers)
Pages: 38
Date: 2013-04-22
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Journal Article: The investment technology of foreign and domestic institutional investors in an emerging market (2013) Downloads
Working Paper: The investment technology of foreign and domestic institutional investors in an emerging market (2013) Downloads
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