Global Private Information in International Equity Markets

56 Pages Posted: 23 Oct 2006

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006

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 behaviour 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 2006). CEPR Discussion Paper No. 5819. Available at SSRN: https://ssrn.com/abstract=937400

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
17
Abstract Views
706
PlumX Metrics