International equity flows and returns: A quantitative equilibrium approach

Rui Albuquerque (), Gregory H. Bauer () and Martin Schneider ()

No 310, Working Paper Series from European Central Bank

Abstract: This paper considers the role of foreign investors in developed-country equity markets. It presents a quantitative model of trading that is built around two new assumptions: (i) both the foreign and domestic investor populations contain investors of different sophistication, and (ii) investor sophistication matters for performance in both public equity and private investment opportunities. The model delivers a unified explanation for three stylized facts about US investors’ international equity trades - (i ) trading by US investors occurs in bursts of simultaneous buying and selling, (ii ) Americans build and unwind foreign equity positions gradually and (iii ) US investors increase their market share in a country when stock prices there have recently been rising. The results suggest that heterogeneity within the foreign investor population is much more important than heterogeneity of investors across countries.

Keywords: Asymmetric information; Heterogenous investors; Asset pricing; International equity flows; International equity returns. (search for similar items in EconPapers)
JEL-codes: F30 G12 G14 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2004-02
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Related works:
Working Paper: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2005)
Working Paper: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2004)
Working Paper: International equity flows and returns: a quantitative equilibrium approach (2005)
Working Paper: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2004)
Journal Article: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2007)
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