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The Relation Between Trades of Domestic and Foreign Investors and Stock Returns in Sri Lanka

29 Pages Posted: 26 Jul 2010  

Lalith P. Samarakoon

University of St. Thomas

Abstract

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

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

Lalith P. Samarakoon (Contact Author)

University of St. Thomas ( email )

2115 Summit Ave
St. Paul, MN 55105
United States

HOME PAGE: http://www.stthomas.edu/business/faculty/directory/Samarakoon_Lalith.html

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