Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia
The performance of foreign investors relative to domestic investors has been a subject of mixed evidence. While foreign investors are often perceived to underperform due to an information disadvantage, they are also known for their aggressive trading and superior performance in initiated orders. We...
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| Language: | English |
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MDPI AG
2024-10-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/12/4/100 |
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| _version_ | 1850040843888492544 |
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| author | Deddy P. Koesrindartoto Aurelius Aaron Shuqi Wang |
| author_facet | Deddy P. Koesrindartoto Aurelius Aaron Shuqi Wang |
| author_sort | Deddy P. Koesrindartoto |
| collection | DOAJ |
| description | The performance of foreign investors relative to domestic investors has been a subject of mixed evidence. While foreign investors are often perceived to underperform due to an information disadvantage, they are also known for their aggressive trading and superior performance in initiated orders. We provide further clarity on this issue. Specifically, by analyzing over five million transactions on the Jakarta Stock Exchange, our findings reveal that foreign investors consistently outperform domestic investors in terms of both annualized returns and profit amounts. Further investigation attributes this outperformance to the higher sophistication of foreign investors, who demonstrate superior stock-picking abilities and effective growth investing strategies. |
| format | Article |
| id | doaj-art-e18bf8890f7e4301a770c6cfa64d2421 |
| institution | DOAJ |
| issn | 2227-7072 |
| language | English |
| publishDate | 2024-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-e18bf8890f7e4301a770c6cfa64d24212025-08-20T02:55:57ZengMDPI AGInternational Journal of Financial Studies2227-70722024-10-0112410010.3390/ijfs12040100Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from IndonesiaDeddy P. Koesrindartoto0Aurelius Aaron1Shuqi Wang2School of Business and Management, Institut Teknologi Bandung, Jl. Ganesha 10, Bandung 40132, IndonesiaSchool of Accounting and Finance, The Hong Kong Polytechnic University, 11 Yuk Choi Rd, Kowloon, Hong KongDepartment of Economics and Finance, University of Stavanger, Kjell Arholms Gate 41, 4021 Stavanger, NorwayThe performance of foreign investors relative to domestic investors has been a subject of mixed evidence. While foreign investors are often perceived to underperform due to an information disadvantage, they are also known for their aggressive trading and superior performance in initiated orders. We provide further clarity on this issue. Specifically, by analyzing over five million transactions on the Jakarta Stock Exchange, our findings reveal that foreign investors consistently outperform domestic investors in terms of both annualized returns and profit amounts. Further investigation attributes this outperformance to the higher sophistication of foreign investors, who demonstrate superior stock-picking abilities and effective growth investing strategies.https://www.mdpi.com/2227-7072/12/4/100trading performancetrading activityforeign investordomestic investorinvestor’s sophistication levelIndonesian stock market |
| spellingShingle | Deddy P. Koesrindartoto Aurelius Aaron Shuqi Wang Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia International Journal of Financial Studies trading performance trading activity foreign investor domestic investor investor’s sophistication level Indonesian stock market |
| title | Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia |
| title_full | Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia |
| title_fullStr | Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia |
| title_full_unstemmed | Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia |
| title_short | Do Foreign Investors Underperform or Outperform Domestic Investors in Trading Activities? Evidence from Indonesia |
| title_sort | do foreign investors underperform or outperform domestic investors in trading activities evidence from indonesia |
| topic | trading performance trading activity foreign investor domestic investor investor’s sophistication level Indonesian stock market |
| url | https://www.mdpi.com/2227-7072/12/4/100 |
| work_keys_str_mv | AT deddypkoesrindartoto doforeigninvestorsunderperformoroutperformdomesticinvestorsintradingactivitiesevidencefromindonesia AT aureliusaaron doforeigninvestorsunderperformoroutperformdomesticinvestorsintradingactivitiesevidencefromindonesia AT shuqiwang doforeigninvestorsunderperformoroutperformdomesticinvestorsintradingactivitiesevidencefromindonesia |