Characterizing Asymmetric Information in International Equity Markets

53 Pages Posted: 22 Mar 2002

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Gregory H. Bauer

University of Rochester - Simon School

Martin Schneider

Independent

Date Written: December 2003

Abstract

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.

Keywords: Private information, asymmetric information, portfolio choice, international equity fows and returns, home bias.

JEL Classification: F36, G12, G14, G15

Suggested Citation

Albuquerque, Rui A. and Bauer, Gregory H. and Schneider, Martin, Characterizing Asymmetric Information in International Equity Markets (December 2003). Simon School of Business Working Paper No. FR 02-07; EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=301361 or http://dx.doi.org/10.2139/ssrn.301361

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Gregory H. Bauer

University of Rochester - Simon School ( email )

Rochester, NY 14627-0107
United States

Martin Schneider

Independent ( email )

No Address Available
United States

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