IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

The Contribution Of Foreign Investors To Price Discovery In The Indonesian Stock Exchange

Listed author(s):


    (Polytechnics State of Padang, Kampus Limau Manis, Padang, Sumatera Barat, West Sumatra 25000, Indonesia)



    (Centre for Applied Financial Studies, University of South Australia, GPO Box 2471, Adelaide South Australia 5001, Australia;
    School of Mathematics and Statistics, The University of Sydney, New South Wales 2006, Australia)



    (School of Accounting, Finance and Economics, Edith Cowan University Australia, 270 Joondalup Drive, Joondalup, 6027 Western Australia, Australia)

This article examines the contribution of foreign investors to price discovery by applying a vector error correction model (VECM) to 30 frequently-traded stocks on the Indonesia Stock Exchange. We use the Lee and Ready (1991) rule to determine the initiator of a trade and compute the volume weighted average price (VWAP) for every 30 min interval during the period 2004–2006. There are three key findings. First, foreign investors are more aggressive than local investors in placing their orders yet foreigners do not trade as often as locals. Second, the profits of foreign investors are smaller than local investors. Third, foreign investors need to adjust their trade price at a higher magnitude to achieve price equilibrium, which indicates that the majority of price discovery occurs among local investors in the Indonesian market.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Annals of Financial Economics.

Volume (Year): 08 (2013)
Issue (Month): 02 ()
Pages: 1-24

in new window

Handle: RePEc:wsi:afexxx:v:08:y:2013:i:02:n:s2010495213500085
DOI: 10.1142/S2010495213500085
Contact details of provider: Web page:

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wsi:afexxx:v:08:y:2013:i:02:n:s2010495213500085. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.