70 Pages Posted: 1 Jul 2011 Last revised: 12 Apr 2016
Date Written: April 12, 2016
We develop an international financial market model in which domestic and foreign residents differ in their beliefs about the information content in public signals.
We determine how informational advantages by domestic investors in the interpretation of home public signals impact equity markets. We evaluate the ability of our model to generate four international finance anomalies: (i) the co-movement of returns and capital flows; (ii) home-equity preference; (iii) the dependence of firm returns on home and foreign factors; and (iv)abnormal returns around foreign firm cross-listing in the home market.
Their relationships with empirical differences-of-opinion proxies are consistent with the model.
Suggested Citation: Suggested Citation
Dumas, Bernard and Lewis, Karen K. and Osambela, Emilio, Differences of Opinion and International Equity Markets (April 12, 2016). INSEAD Working Paper No. 2016/24/FIN. Available at SSRN: https://ssrn.com/abstract=1876447 or http://dx.doi.org/10.2139/ssrn.1876447
By Jiang Wang