Why do foreign investors underperform domestic investors in trading activities? Evidence from Indonesia

Foreign investors generally underperform domestic investors in trading activities. This study shows that their inferior performance is attributable to non-initiated orders. Foreign investors actually perform better than domestic investors in initiated orders. In addition, their performance is also mixed when trades are classified depending on who the counterparties are. These mixed performances can be explained by neither the information disadvantage hypothesis proposed by [Dvo?ák, T., 2005. Do domestic investors have an information advantage? Evidence from Indonesia. Journal of Finance 60, 817–839.] nor the poor timing of trade hypothesis suggested by [Choe, H., Kho, B.C., Stulz, R., 2005. Do domestic investors have an edge? The trading experience of foreign investors in Korea. Review of Financial Studies 18, 795–829.]. We propose and confirm that their inferior performance is explained by their aggressive trading behavior. Three metrics we utilize to measure the aggressiveness of foreign investors’ trading provide overwhelmingly strong evidence that foreign investors are more aggressive than their domestic counterparts.     

Review of consumer activism in Korea, 1910–1995: A political-economic approach

Consumer activism in Korea has a long history, starting from an anticolonial social movement and developing into one which targets consumers' interests at both individual and societal levels. As a social movement, consumer activism needs to be understood within a political and economic environment, particularly in Korea which has gone through dynamic changes both politically and economically. While understanding of the political environment sheds further light on governmental consumer policies as well as manifested consumer activism, eminent consumer problems and issues were acknowledged according to the stage of economic development. This political-economic approach deepens our understanding of the Korean consumer movement and provides a framework for analyzing consumer activism in other Eastern Asian countries which are experiencing similar political or economic developments.

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Überblick über Verbraucheraktivismus in Korea von 1910 bis 1995: ein politischökonomischer Ansatz

Zusammenfassung Verbraucheraktivismus hat in Korea eine lange Geschichte, die als soziale antikolonialistische Bewegung begann und sich zu einer Bewegung entwickelt, die die Interessen der Verbraucher sowohl auf individueller Ebene wie auch auf gesellschaftlicher Ebene im Visier hat. Als soziale Bewegung muß Verbraucheraktivismus in einem politischen und ökonomischen Umfeld gesehen werden, insbesondere in einem Land wie Korea, das große politische und ökonomische Umwälzungen durchlaufen hat. Während ein Verständnis der politischen Umstände Erkenntnisse über staatliche Verbraucherpolitik, aber auch über sonstige Verbraucheraktivitäten, ermöglicht, ist es der Stand der wirtschaftlichen Entwicklung, der darüber bestimmt, welche Verbraucherprobleme und -themen in den Vordergrund rücken. Dieser kombinierte politisch-ökonomische Ansatz ermöglicht ein vertieftes Verständnis der koreanischen Verbraucherbewegung und bietet auch einen Bezugsrahmen für die Analyse der Verbraucheraktivitäten in anderen ostasiatischen Ländern, die eine ähnliche politische und ökonomische Entwicklung wie Korea erleben.

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Kee-Choon Rhee is a Professor in the Department of Consumer & Child Studies, the Seoul National University, Seoul, Korea 151–741. Jinkook Lee is an Assistant Professor of Retail & Consumer Science, University of Tennessee, 1215 West Cumberland Avenue, Knoxville, Tennessee 37996-1900, U.S.A.The uthors thank Robert N. Mayer, Robert O. Herrmann, and Loren V. Geistfeld for their insightful comments.     

The equilibrium price of futures contracts: A result drawn from capital asset pricing model

A recent study shows that separation theorems in the stock and forward market literatures may not hold in an integrated financial market; therefore, the securities market may influence futures trading. This article investigates the securities market influence on the futures price. The result shows that although the futures price incorporates the investor's expectation about the future spot price, it generally is not a best estimate of the spot price. In addition, it is shown that the speculative activity can destabilize the cash market for some commodities, if initially, the underlying cash price is highly volatile.     

Revenue-sharing contracts across an extended supply chain

Revenue-sharing contracts have been heavily researched and promoted in the academic literature. However, despite some well-documented examples (e.g., the way Blockbuster and film studios were able to increase availability of the latest video releases in rental shops through a revenue-sharing contract), they seem to be much less prevalent in practice. A possible reason for this gap between theory and practice is that most academic research has focused on two-party contracts involving only one buyer and one supplier, while in reality, most supply chains consist of multiple stages. When there are several stages in the chain—as is the case for many extended, global supply chains—the traditional revenue-sharing contract is no longer optimal for the two contracting parties, as every other participant in the chain is able to leverage the revenue-sharing contract to its own advantage. Put another way, a revenue-sharing contract between only two parties is not incentive-compatible across all participants. Accordingly, we suggest that a revenue-sharing contract should involve all the supply chain partners, and propose a spanning revenue-sharing contract that accomplishes coordination and incentive-compatibility across the same.     

STOCK MARKET REACTION TO ETHICAL INITIATIVES OF DEFENSE CONTRACTORS: THEORY AND EVIDENCE

This paper offers an Investor Decision Framework (IDF) to describe and measure investor behavior toward social responsibility information. This framework seeks to explain how investors perceive the effects of social responsibility information on firm value. The formation in 1986 by 32 major defense contractors of the Defense Industries Initiative (DII) provides an ideal example to assess stock market reaction to an ethical initiative. The performance of the DII firms was compared with that of a control group of non-DII defense firms, which did not sign the agreement, in order to measure and determine the extent to which the market placed substance on the DII as a public commitment to ethics. We initially posited that the DII firms stock price would move in a significantly positive direction. However, when our analysis revealed a significant negative impact not only on DII, but also on non-DII defense stock prices, we were forced to reject thisa priorihypothesis. The market interpreted this ethical initiative as (i) a precursor of future sanctions towards firms engaged in defense contracting or (ii) as a penalty for social irresponsibility imposed by socially conscious investors. Either way, it would have a negative impact upon future cash flows.     

Venture capital‐backed and commitments test entity initial public offerings on the ASX

This paper examines initial returns to venture capital (VC) backed and non‐VC‐backed IPO companies on the Australian Securities Exchange (ASX). We find support for the theoretical predictions of Rossetto (2008), by providing empirical evidence that VC‐backed CTE IPOs exhibit greater wealth losses to pre‐IPO investors compared to non‐VC‐backed CTE IPOs during hot issue markets. We also find that greater retained ownership increases IPO underpricing. In the subsample of IPOs with below the median level of retained ownership IPOs, VC‐backed CTE IPOs and VC‐backed, non‐CTE IPOs have significantly higher levels of underpricing and wealth loss compared to non‐VC‐backed, non‐CTE IPOs.     

The return to value in Asian stock markets

This paper investigates the returns to value strategies in four Asian stock markets: Hong Kong, Korea, Singapore and Taiwan. Hong Kong, Korea and Singapore exhibit value premia while Taiwan shows value discounts. The impact of firm characteristics on value premia differs across the four markets. The robustness tests indicate that the value premia are time-varying. They become greater in the post-crisis period across all four countries, indicating that high volatility during the crisis period did understate the value premia. The value strategy's excess return is sensitive to the sample selection rule and the firm size and liquidity effects. With tighter sample selection criteria, value premia tend to decline, which indicates that both the firm size effect and the liquidity effect are important sources of value premia. Unequal weighting assigned to financial variables in constructing the Average Price Rank (APR) based on the overall performance of single-variable approach does not necessarily improve the results.     

Brand familiarity as a moderating factor in the ad and brand attitude relationship and advertising appeals

Studies examining the effects of advertising appeals have yielded conflicting results. Some have found that an emotional appeal is more persuasive than an informational appeal, while others have demonstrated the opposite. The objective of the current study was to explore a theoretical explanation for the conflicting results in advertising appeal research. The findings of this study support the theory that brand familiarity determines the effectiveness of advertising appeal. The study results additionally support the theory that attitudes toward the ad predict the consumer’s attitude toward the brand. In addition, the study found that brand familiarity moderates the strength of the relationship between ad attitude and brand attitude. Other aspects and the implications of these findings are discussed in this paper.