Emerging market transaction costs: Evidence from Indonesia

Bonser‐Neal, Catherine; Linnan, David K.; Neal, Robert

doi:10.1016/s0927-538x(99)00003-7

Cited by 29 publications

(8 citation statements)

References 19 publications

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“…5 Market Return represents the daily return on the Tadawul All Shares Index (TASI) which covers all listed companies in the market. We follow Aitken and Frino (1996) and Bonser-Neal et al (1999) in using the market return on the day of the block trade. A positive relationship is expected to exist between market return and price impact given the positive beta of most stocks and the findings of previous studies (Aitken and Frino, 1996;Bonser-Neal et al, 1999;Chiyachantana et al, 2004;Frino et al, 2007).…”

Section: Methodsmentioning

confidence: 99%

“…A negative price change yields a sell-initiated trade. We follow Bonser-Neal et al (1999) in determining how to sign a trade when the change in the price is zero. We compare trade price P(t) with the trade price P(t-2) and if the change in price is still zero, we repeat the process until we find a difference in prices or we stop the process at P(t-5).…”

Section: Data Processing and Descriptive Analysismentioning

confidence: 99%

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Price impact of block trades in the Saudi stock market

Alzahrani¹,

Gregoriou

Hudson

2013

Journal of International Financial Markets, Institutions and Mo

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JEL classification: G12 G14 Keywords:Price impact Block trades Saudi stock market Information asymmetry and liquidity a b s t r a c t This paper examines the price impact of block trades for all listed firms in the Saudi stock market (SSM) using high frequency data. We find an asymmetric price impact for block trades of 0.5% for block purchases and −0.38% for block sales. However, on average, the price effect of a block trade is small and short-lived suggesting that resiliency is high in the market. Moreover, we find a direct relationship between the size of the trades and the level of information asymmetry. The intraday pattern of price impacts is similar to patterns documented in other markets, namely an inverse J-shaped pattern. Finally, sophisticated traders can gain abnormal profits through "free riding" benefiting from overreaction before and price reversals after block trades.

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Section: Methodsmentioning

confidence: 99%

Section: Data Processing and Descriptive Analysismentioning

confidence: 99%

Price impact of block trades in the Saudi stock market

Alzahrani¹,

Gregoriou

Hudson

2013

Journal of International Financial Markets, Institutions and Mo

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“…Both classes of investors exhibited a tendency to herd, but the magnitude was greater for foreign traders. Bonser-Neal et al (1999) examined the price impact of trades in the Indonesian equity market using opening, closing and daily VWAPs and found that foreign trades had a significantly larger price impact than local trades. Sudiman et al (2013) examined characteristics of stockholdings of foreign and local investors in terms of firm size, price levels and liquidity.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This study is motivated by the short-term information advantage of domestic investors, as suggested by Dvořák (2005), and the high price impact of foreign trades identified by Bonser-Neal et al (1999). On one hand, if domestic investors are at an advantage due to their short-term information, this means that their trades are more likely to contribute to the price discovery process.…”

Section: Introductionmentioning

confidence: 99%

The Contribution of Foreign Investors to Price Discovery in the Indonesian Stock Exchange

Sudiman¹,

Allen

Powell

2013

Ann. Finan. Econ.

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This article examines the contribution of foreign investors to price discovery by applying a vector error correction model (VECM) to 30 frequently-traded stocks on the Indonesia Stock Exchange. We use the Lee and Ready (1991) rule to determine the initiator of a trade and compute the volume weighted average price (VWAP) for every 30 min interval during the period 2004-2006. There are three key findings. First, foreign investors are more aggressive than local investors in placing their orders yet foreigners do not trade as often as locals. Second, the profits of foreign investors are smaller than local investors. Third, foreign investors need to adjust their trade price at a higher magnitude to achieve price equilibrium, which indicates that the majority of price discovery occurs among local investors in the Indonesian market.

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“…If one group, either foreigners or locals, is better informed than the other we should expect that their trades earn higher returns as in Dvorak (2005), Froot and Ramadorai (2001) and Huang and Shiu (2005), cause larger price impacts as in Bonser-Neal et al (1999) and Choe, Kho and Stulz (2005), or better predict earning surprises as in Seasholes (2004). However, we take a different approach.…”

Section: Hypothesismentioning

confidence: 99%

Do Local or Foreign Traders Know More in an Emerging Market? A Possible Solution of the Puzzle

Agudelo

2007

SSRN Journal

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A branch of the literature in international finance has tried to give a definitive answer to the question, who is better informed in an emerging market, Foreigners or Locals?. We measured the probability of informed trading (PIN) for the Jakarta Stock Exchange for two types of investors, foreigners and locals, developing an extension of the model of Easley, Kiefer and O'Hara (1997).We find that locals do most of the informed trades, but also most of the uninformed trades. On the other hand, given the type of investor, foreigners are more likely to be informed than locals.Besides, the evidence shows that locals tend to be more informed in smaller and more volatile firms, whereas foreigners tend to be more informed in larger an less volatile firms and firms with higher foreign ownership. We also find evidence of market-wide effects on liquidity from the foreign informed trades but not from the local ones.

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Emerging market transaction costs: Evidence from Indonesia

Cited by 29 publications

References 19 publications

Price impact of block trades in the Saudi stock market

Price impact of block trades in the Saudi stock market

The Contribution of Foreign Investors to Price Discovery in the Indonesian Stock Exchange

Do Local or Foreign Traders Know More in an Emerging Market? A Possible Solution of the Puzzle

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