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

Hyuk Choe; Bong-Chan Kho; René M. Stulz

doi:10.1093/rfs/hhi028

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

Hyuk Choe¹; Bong-Chan Kho¹; René M. Stulz²

¹ Seoul National University · ² The Ohio State University

Review of Financial Studies 2005

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.

DOI: 10.1093/rfs/hhi028
Volume: 18 (3)
Pages: 795-829
Language: en
Export: BibTeX
Sources: crossref openalex