Market Segmentation in Developing Markets Evidence from Thai Non-Voting Depository Receipts
Market Segmentation in Developing Markets Evidence from Thai Non-Voting Depository Receipts

Summary/Abstract: The introduction of Non-Voting Depository Receipts (NVDR) in the Stock Exchange Thailand allows for nearly ideal natural experiment to investigate the differences between three segments of traders; local, foreign and NVDR trades. We hypothesize NVDR traders who forgo any rights of control, must be compensated in some way for giving up this valuable aspect of equity ownership. We find that NVDR traders exhibit a higher probability of informed trades, NVDR order imbalances are significant in predicting daily returns and naive traders can use information from NVDR trades to generate trading profits. The implications of this study are of great interest to caretakers of emerging markets who must balance the desires of local constituents while maintaining a market that is liquid and attractive to foreign investors.

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