29 Pages Posted: 26 Jul 2010
This study investigates the relation between equity flows and returns in Sri Lanka using daily trade data categorized by investor classes. The results show that purchases and sales of domestic and foreign investors, both institutional and individual, are positively related with past returns, except during crisis periods, when they are negatively related. Domestic institutional and foreign individual purchases lead to higher future returns whereas domestic individual purchases lead to lower future returns. Foreign institutional purchases do not impact future returns. Sales by domestic investors have no impact on future returns while sales by foreign investors lead to higher future returns.
Keywords: Equity Flows, Domestic And Foreign Investors, Positive Feedback, Contrarian
JEL Classification: F3, G11, G15
Suggested Citation: Suggested Citation
Samarakoon, Lalith P., The Relation Between Trades of Domestic and Foreign Investors and Stock Returns in Sri Lanka. Journal of International Financial Markets, Institutions and Money, Vol. 19, pp. 850-861, 2009. Available at SSRN: https://ssrn.com/abstract=1648839