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Global Private Information in International Equity Markets

61 Pages Posted: 8 Aug 2006 Last revised: 28 Dec 2014

Rui A. Albuquerque

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

Gregory H. Bauer

Bank of Canada

Martin Schneider

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2008

Abstract

This paper studies international equity markets when some investors have private information that is valuable for trading in many countries simultaneously. We use a dynamic model of equity trading to show that “global” private information helps understand US investors’ trading behavior and performance. In particular, the model predicts global return chasing — positive comovement of US investors’ net purchases with returns in many countries — which we show to be present in the data. Return chasing in our model can be due to superior performance of US investors, not inferior knowledge or naive trend-following. We also show that trades due to private information are strongly correlated across countries: a common “global” factor accounts for about half their variation.

Keywords: Private information, global private information, asymmetric information, portfolio choice, international equity flows and returns, home bias, return chasing

JEL Classification: F36, G12, G14, G15

Suggested Citation

Albuquerque, Rui A. and Bauer, Gregory H. and Schneider, Martin, Global Private Information in International Equity Markets (September 1, 2008). Journal of Financial Economics (JFE), Vol. 94, 2009. Available at SSRN: https://ssrn.com/abstract=922695 or http://dx.doi.org/10.2139/ssrn.922695

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

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

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

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Gregory H. Bauer

Bank of Canada

234 Laurier Street
Ottawa, Ontario K1A 0G9
Canada

Martin Schneider

Independent ( email )

No Address Available

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