NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

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

NBER Working Paper No. 10502
Issued in May 2004
NBER Program(s):   IFM   AP

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 of 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.

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Document Object Identifier (DOI): 10.3386/w10502

Published: Hyuk Choe & Bong-Chan Kho & René M. Stulz, 2005. "Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(3), pages 795-829. citation courtesy of

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