Familiarity and Surprises in International Financial Markets: Bad news travels like wildfire; good news travels slow

Jordi Mondria, Xin Wang and Thomas Wu

Journal of International Money and Finance, 2021, vol. 115, issue C

Abstract: In this paper, we decompose attention allocation into two components – the familiar and the surprising – with opposite implications for US purchases of foreign stocks. On the one hand, familiarity-induced attention leads to an increase in US holdings of foreign equities. On the other hand, surprise-induced attention is associated with net selling of foreign stocks because US investors tend to pay more attention to negative than to positive economic surprises from foreign countries. Our findings suggest that information asymmetries between locals and non-locals are more pronounced when it comes to good news, with information regarding bad news being relatively symmetric.

Keywords: US purchases of foreign stocks; Attention allocation; Asymmetric information; Geography; Economic surprises (search for similar items in EconPapers)
JEL-codes: D82 F30 G11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:115:y:2021:i:c:s0261560621000395

DOI: 10.1016/j.jimonfin.2021.102390

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