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Do domestic investors have more valuable information about individual stocks than foreign investors?

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  • Do domestic investors have more valuable information about individual stocks than foreign investors?
  • Choe, Hyuk; Kho, Bong-Chan; Stulz, Rene M.
  • National Bureau of Economic Research


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Title Do domestic investors have more valuable information about individual stocks than foreign investors?
Similar Titles
Material Type Reports
Author(English)

Choe, Hyuk; Kho, Bong-Chan; Stulz, Rene M.

Publisher

Cambridge:National Bureau of Economic Research

Date 2001-01
Series Title; No NBER Working Paper Series / 8073
Pages 43
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Economy < Financial Policy
Holding National Bureau of Economic Research

Abstract

Using trade data from Korea from December 1996 to November 1998, we find evidence that domestic individual investors have a short-lived private information advantage for individual stocks over foreign investors, but almost no evidence that domestic institutional investors have such an advantage. Foreign investors trade at worse prices than resident investors for large trades, for smaller stocks, and more so for sales than for purchases. Foreign investors sell to domestic investors before a stock has a large positive abnormal return and buy from domestic investors before a stock has a large negative abnormal return. Using intraday data, the large trades of domestic individual investors have more information than the large trades of foreign investors or of domestic institutional investors.