Characterizing Asymmetric Information in International Equity Markets
Rui A. Albuquerque
Boston University - School of Management; Católica-Lisbon School of Business and Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Gregory H. Bauer
Bank of Canada
Simon School of Business Working Paper No. FR 02-07; EFA 2002 Berlin Meetings Presented Paper
This paper studies the international portfolio flows of US investors to examine the information structure of international equity markets. We use an empirical model of portfolio flows with both public and private information to extract measures of trades due to private information. We find that such trades are highly correlated across countries. In particular, a common global factor accounts for about half of the variation in trades due to private information. We show that the global factor helps explain the cross section of international equity returns, after controlling for public information. The finding that a substantial portion of trades due to private information across countries contains the same common information challenges the conventional view that domestic investors have better private information about their home market than foreign investors.
Number of Pages in PDF File: 53
Keywords: Private information, asymmetric information, portfolio choice, international equity fows and returns, home bias.
JEL Classification: F36, G12, G14, G15working papers series
Date posted: March 22, 2002
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.688 seconds