IMF Working Papers

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

By Ila Patnaik, Ajay Shah

April 22, 2013

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Ila Patnaik, and Ajay Shah. The Investment Technology of Foreign and Domestic Institutional Investors in an Emerging Market, (USA: International Monetary Fund, 2013) accessed September 20, 2024
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.

Subject: Asset allocation, Asset and liability management, Asset prices, Financial markets, Foreign direct investment, Prices, Production, Production growth, Productivity, Stock markets

Keywords: Asset allocation, Asset prices, Bottom quintile company, Chosen firm, DII investment, DII ownership, Domestic Institutional Investors, Firm beta, Firm characteristic, Foreign Investors, Global, Institutional Investor, Production growth, Productivity, R&D company, Stock markets, WP

Publication Details

  • Pages:

    38

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2013/090

  • Stock No:

    WPIEA2013090

  • ISBN:

    9781484335567

  • ISSN:

    1018-5941

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