Do Domestic Investors Have an Information Advantage? Evidence from Indonesia

Tomas Dvorak

No 2001-04, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Using transaction data from the Jakarta Stock Exchange, I find three pieces of evidence which indicate that domestic investors have an information advantage over foreign investors. First, foreign investors systematically buy at higher and sell at lower intra-day prices than domestic investors. Second, foreign investors tend to sell prior to large positive returns. Finally, the permanent impact of foreign purchases is smaller than that of domestic purchases. Over time, prices at which foreign investors trade have worsened, while foreign selling prior to positive returns has disappeared.

Pages: 25 pages
Date: 2001-10
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Published in Journal of Finance, April 2005, v. 60, iss. 2, pp. 817-39

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