Differences of Opinion and International Equity Markets

Bernard Dumas (), Karen Lewis and Emilio Osambela

The Review of Financial Studies, 2017, vol. 30, issue 3, 750-800

Abstract: We develop an international financial market model in which domestic and foreign residents differ in their beliefs about the information content in public signals. We determine how informational advantages of domestic investors in the interpretation of home public signals affect equity markets. We evaluate the ability of our model to generate four international-finance anomalies: (i) the co-movement of returns and capital flows, (ii) home-equity preference, (iii) the dependence of firm returns on home and foreign factors, and (iv) abnormal returns around foreign firm cross-listing in the home market. Their relationships with empirical differences-of-opinion proxies are consistent with the model.Received January 15, 2011; editorial decision May 16, 2016 by Editor Geert Bekaert.

JEL-codes: F23 F3 G11 G12 G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Differences of Opinion and International Equity Markets (2014)
Working Paper: Differences of Opinion and International Equity Markets (2011)
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