Foreign versus domestic equity holdings and equity returns in South Africa

Abstract

Foreign versus domestic investor returns performance was quantified and interpreted on the Johannesburg Stock Exchange (JSE) equities market from 2007 to 2009, utilising a real-time high frequency intraday transactional dataset sourced directly from the exchange. Foreign investors bought at higher and sold at lower than volume weighted average market prices relative to domestic investors, for the same stocks traded randomly on the same day. Foreign investors exhibited diminished returns attributed to information asymmetry effects. Across all trades, domestic investors demonstrated an edge over foreign investors when trading securities on the JSE.