Do Domestic Investors Have an Information Advantage? Evidence from Indonesia



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    • Tomáš Dvořák is from Union College, Department of Economics. I am grateful to Irmawati Amran and Kris Yarismal from the Jakarta Stock Exchange for their help in providing data and answering numerous questions, and to Mark Seasholes, Frank Warnock, and two anonymous referees for their helpful comments and suggestions.


Using transaction data from Indonesia, this paper shows that domestic investors have higher profits than foreign investors. In addition, clients of global brokerages have higher long-term and smaller medium (intramonth) and short (intraday) term profits than clients of local brokerages. This suggests that clients of local brokerages have a short-lived information advantage, but that clients of global brokerages are better at picking long-term winners. Finally, domestic clients of global brokerages have higher profits than foreign clients of global brokerages, suggesting that the combination of local information and global expertise leads to higher profits.