Essay on foreign and domestic investors
This dissertation consists of two essays examining the role of foreign and domestic investors using data from the Jakarta Stock Exchange. The first essay examines foreign contribution on domestic market microstructure. In this essay, we examine whether foreign investors' presence is associated with positive abnormal return, and whether the positive abnormal return can be explained by liquidity and efficiency changes before and after the presence. We find that foreign investors' presence is associated with positive abnormal return. We find that changes in efficiency variables explain the abnormal return better than do liquidity variables. The second essay investigates whether foreign or domestic investors possess better information of certain events. We investigate cumulative returns associated with foreign and domestic investors. We find that, in the regular-market where trading is conducted through competitive continuous auction, cumulative returns associated with domestic investors are larger than those with foreign investors, suggesting that domestic investors are better informed than foreign investors. In the cross-market, where trading is conducted through negotiations, we do not find consistent result as to which group possesses better information than the other group. We attribute this finding to liquidity traders in the cross-market. Our findings support information asymmetry in international markets. ^
Mamduh M Hanafi,
"Essay on foreign and domestic investors"
Dissertations and Master's Theses (Campus Access).