Short-Term Trading Skills of Individuals, Institutions, and Foreigners: A New Approach Based on Relative Performance

This paper evaluates the short-term trading skills of three types of investor: individuals, institutions, and foreigners. Based on a dataset that identifies the types of sellers and buyers for all trades, we examine (i) how stock prices move contemporaneously with trading activities between investor types, and (ii) whether, given such price movements, one type of investor has superior skills in timing purchases (sales) of stocks over another type of investor. Using tests based on daily and weekly horizons, we find evidence that individuals have poor trading skills and provide liquidity to both institutions and foreigners. When domestic institutions trade with foreigners, we find that foreigners generally show superior trading skills.