Do institutional investors perform better in emerging markets?

Emerging markets with their imperfections, low liquidity, and dominance of naive retail investors are likely to provide attractive profit-making opportunities for sophisticated and resourceful institutional investors. The institutional investors traditionally had low participation in these markets, but it has grown tremendously during recent years. Therefore, these markets provide a natural experimental setting to understand the implications of their activities on asset pricing and to evaluate their market timing and stock-picking skills. In this study, we compare the performance of foreign institutional investors (FIIs) and domestic institutional investors (DIIs) in one of the important Asian emerging markets.