An Examination of Home Advantage (Bias) Argument in the Indian Financial Markets

  • Sanjay Seghal University of Delhi
  • Neeta Tripathi DYAL SINGH COLLEGE,DELHI UNIVERSITY
DOI: https://doi.org/10.5296/ajfa.v1i2.74

Abstract

In this paper we examine if Domestic Financial Institutional Investors (DFIs) have any home advantage (Bias) compared to Foreign Institutional Investors (FIIs) for both the equity and debt segments of the Indian capital market. We find that both the DFIs and FIIs follow a positive feedback trading mechanism chasing stock market returns. However, FIIs seem to be reacting faster compared to DFIs in case of equity market. This may be owing to the fact that the former have international expertise and greater resources and play a dominant role in this segment of capital market as shown by their share in the trading volume. In contrast, the DFIs lead the market returns which in turn attract the FIIs thus supporting home advantage (bias) argument. Interestingly, the DFIs, unlike in equity market, play a more important role in debt market trading activities. Our results point at greater debt market inefficiency in the Indian context, which may be a reflection of the relatively underdeveloped nature of this market. 

 

Key Words:  Home advantage (bias), Domestic Financial Institutional Investors, Foreign Institutional Investors, Market returns, Equity market, Debt Market.

JEL Classifications: G100, G140

 


Author Biographies

Sanjay Seghal, University of Delhi
Prof. Sanjay Sehgal is Head, Department of Financial Studies and Dean, Faculty of Commerce and Business, University of Delhi.  He is also the Chair, Board of Research Studies, Faculty of Commerce and Business, University of Delhi.  
 

Prof. Sehgal is a Ph.D. in Finance from Delhi School of Economics, University of Delhi and is post-doctoral Commonwealth Fellow, Department of Accounting and Finance, London School of Economics, UK. His field of specialisation is investment management, corporate finance and financial econometrics. He has completed three government funded major research projects, and has written one book and 52 research papers which are published in referred international and national journals
Neeta Tripathi, DYAL SINGH COLLEGE,DELHI UNIVERSITY
Dr.Neeta Tripathi is an Assisstant Professor with Dayal Singh College,Delhi University.She has done her Masters in Commerce and Ph.D from Delhi University.Her Teaching areas are Financial Management and Accounting.She has published two research papers to date.
Published
2010-05-05
Issue
Vol. 1 No. 2 (2009)
Section
Research Articles

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