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Global Private Information in International Equity Markets

Martin Schneider, Rui Albuquerque and ,

No 5819, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: F36 G12 G14 G15 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-cfn and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Journal Article: Global private information in international equity markets (2009) Downloads
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