Why do foreign investors underperform domestic investors in trading activities? Evidence from Indonesia

被引:54
|
作者
Agarwal, Sumit [2 ]
Faircloth, Sheri [1 ]
Liu, Chunlin [1 ]
Rheed, S. Ghon [3 ,4 ]
机构
[1] Univ Nevada, Coll Business Adm, Reno, NV 89557 USA
[2] Fed Reserve Bank Chicago, Chicago, IL 60604 USA
[3] Univ Hawaii, Shidler Coll Business, Honolulu, HI 96822 USA
[4] Sungkyunkwan Univ, Seoul, South Korea
关键词
Trading performance; Foreign investor; Domestic investor; Poor timing of trade hypothesis; Information advantage hypothesis; Aggressive trading hypothesis; Initiated orders; Non-initiated orders; Indonesian stock market;
D O I
10.1016/j.finmar.2008.04.001
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
Foreign investors generally underperform domestic investors in trading activities. This study shows that their inferior performance is attributable to non-initiated orders. Foreign investors actually perform better than domestic investors in initiated orders. In addition, their performance is also mixed when trades are classified depending on who the counterparties are. These mixed performances can be explained by neither the information disadvantage hypothesis proposed by [Dvorak, T., 2005. Do domestic investors have an information advantage? Evidence from Indonesia. Journal of Finance 60, 817-839.] nor the poor timing of trade hypothesis suggested by [Choe, H., Kho, B.C., Stulz, R., 2005. Do domestic investors have an edge? The trading experience of foreign investors in Korea. Review of Financial Studies 18, 795-829.]. We propose and confirm that their inferior performance is explained by their aggressive trading behavior. Three metrics we utilize to measure the aggressiveness of foreign investors' trading provide overwhelmingly strong evidence that foreign investors are more aggressive than their domestic counterparts. (c) 2008 Elsevier B.V. All rights reserved.
引用
收藏
页码:32 / 53
页数:22
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