Trading Behavior of Foreign Vis a Vis Local Investors in The Indonesian Stock Market

  • Soemarso Slamet Rahardjo University of Indonesia
Keywords: trading, behavior, foreign, indonesian stock market

Abstract

This paper studies the behavior of foreign, local investors and total market in a stock trading. The analysis is focused on their implementation of positive feedback strategy, the existence of mean reverting process and their sensitivity toward expected capital gain and losses. The result reveals that both of these two investors apply the positive feedback strategy, at a different degree. The investment horizon of the foreign investors is shorter than the local investors. There is a mean reverting pattern in the price volatilities. The convergence period for local investor is 2.4. The market needs 1.8 month. No convergence period for foreign investors. The local investors and total market are neutral toward expected gain and losses. The foreign investors are more sensitive to capital loss. Previous price and volume changes have a leverage effect to the current demand of foreign investors. The local investors are affected by changes in price only.

Author Biography

Soemarso Slamet Rahardjo, University of Indonesia

Teaching staff at the Department of Accountancy, Faculty of Economics at University of Indonesia. Currently he is also member of board of commissioners, audit committee and risk monitoring committee of several companies in Indonesia. Previous work experiences include country managing partner and chairman of international accounting firms in Indonesia. His earned his doctoral degree in economics with a speciality in Monetary Economics at the Faculty of Economics of University of Indonesia.  He has a bachelor degree in accounting from the same university. He has written several published articles in economics and accounting, most recently: “Stock Market Crisis – Evidence of Speculative Behaviourm,” Published by Lambert Academic Publishing, Germany (2014).

References

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Published
2015-04-28
How to Cite
Rahardjo, S. S. (2015). Trading Behavior of Foreign Vis a Vis Local Investors in The Indonesian Stock Market. Gadjah Mada International Journal of Business, 17(1), 47-64. Retrieved from https://jurnal.ugm.ac.id/v3/gamaijb/article/view/15501