Do Domestic Investors Have More Valuable Information About Individual Stocks than Foreign Investors?

43 Pages Posted: 5 Jan 2001 Last revised: 25 Jul 2021

See all articles by Hyuk Choe

Hyuk Choe

Seoul National University - College of Business Administration

Bong-Chan Kho

Seoul National University, Business School

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2001

Abstract

Using trade data from Korea from December 1996 to November 1998, we find evidence that domestic individual investors have a short-lived private information advantage for individual stocks over foreign investors, but almost no evidence that domestic institutional investors have such an advantage. Foreign investors trade at worse prices than resident investors for large trades, for smaller stocks, and more so for sales than for purchases. Foreign investors sell to domestic investors before a stock has a large positive abnormal return and buy from domestic investors before a stock has a large negative abnormal return. Using intraday data, the large trades of domestic individual investors have more information than the large trades of foreign investors or of domestic institutional investors.

Suggested Citation

Choe, Hyuk and Kho, Bong-Chan and Stulz, Rene M., Do Domestic Investors Have More Valuable Information About Individual Stocks than Foreign Investors? (January 2001). NBER Working Paper No. w8073, Available at SSRN: https://ssrn.com/abstract=255337

Hyuk Choe (Contact Author)

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)
822-880 8257 (Phone)
822-882 0547 (Fax)

Bong-Chan Kho

Seoul National University, Business School ( email )

607 LG Hall
1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
+82-2-880-8798 (Phone)
+82-2-876-8411 (Fax)

Rene M. Stulz

Ohio State University (OSU) - Department of Finance ( email )

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Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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Belgium

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