Characterizing Asymmetric Information in International Equity Markets

Rui Albuquerque, Gregory Bauer and Martin Schneider

International Finance from University Library of Munich, Germany

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 flows and returns; home bias (search for similar items in EconPapers)
JEL-codes: F36 G12 G14 G15 (search for similar items in EconPapers)
Date: 2004-05-06
New Economics Papers: this item is included in nep-fin and nep-fmk
Note: Type of Document - pdf
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0405005

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