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Do Domestic Investors Have an Information Advantage? Evidence from Indonesia

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Abstract

Using transaction data from the Jakarta Stock Exchange, I nd three pieces of evidence which indicate that domestic investors have an information advantage over foreign investors. First, foreign investors systematically buy at higher and sell at lower intra-day prices than domestic investors. Second, foreign investors tend to sell prior to large positive returns. Finally, the permanent impact of foreign purchases is smaller than that of domestic purchases. Over time, prices at which foreign investors trade have worsened, while foreign selling prior to positive returns has disappeared.

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File URL: http://web.williams.edu/Economics/wp/jsxinfo.pdf
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Bibliographic Info

Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2001-04.

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Length: 25 pages
Date of creation: Oct 2001
Date of revision:
Publication status: published in Journal of Finance, April 2005, v. 60, iss. 2, pp. 817-39
Handle: RePEc:wil:wileco:2001-04

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  1. Shleifer, Andrei, 1986. " Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-90, July.
  2. Aditya Kaul & Vikas Mehrotra & Randall Morck, 1999. "Demand Curves for Stocks Do Slope Down: New Evidence From An Index Weights Adjustment," Harvard Institute of Economic Research Working Papers 1884, Harvard - Institute of Economic Research.
  3. Michael J. Brennan. and H. Henry Cao., 1997. "International Portfolio Investment Flows," Research Program in Finance Working Papers RPF-271, University of California at Berkeley.
  4. Comerton-Forde, Carole, 1999. "Do trading rules impact on market efficiency? A comparison of opening procedures on the Australian and Jakarta Stock Exchanges," Pacific-Basin Finance Journal, Elsevier, vol. 7(5), pages 495-521, December.
  5. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc.
  6. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
  7. Grinblatt, Mark & Keloharju, Matti, 2000. "The investment behavior and performance of various investor types: a study of Finland's unique data set," Journal of Financial Economics, Elsevier, vol. 55(1), pages 43-67, January.
  8. Hau, Harald, 2001. "Geographic patterns of trading profitability in Xetra," European Economic Review, Elsevier, vol. 45(4-6), pages 757-769, May.
  9. Bonser-Neal, Catherine & Linnan, David & Neal, Robert, 1999. "Emerging market transaction costs: Evidence from Indonesia," Pacific-Basin Finance Journal, Elsevier, vol. 7(2), pages 103-127, May.
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