The Investment Technology of Foreign and Domestic Institutional Investors in an Emerging Market

Author/Editor: Ila Patnaik ; Ajay Shah
Publication Date: April 22, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The literature on the investment technology of foreign versus domestic investors has inconclusive results. This paper revisits the question, with a focus on decomposing portfolio performance into asset allocation and security selection. We document signicant differences in exposure to systematic asset pricing factors between foreign and domestic investors. A quasi-experimental strategy is introduced, for comparing security selection after controlling for diferences in asset allocation. Our results show that foreign investors in India do remarkably poorly at security selection.
Series: Working Paper No. 13/90
Subject(s): Investment | Foreign investment | Asset management | Asset prices | Emerging markets

Publication Date: April 22, 2013
ISBN/ISSN: 9781484335567/1018-5941 Format: Paper
Stock No: WPIEA2013090 Pages: 38
US$18.00 (Academic Rate:
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