International equity flows and returns: a quantative equilibrium approach

Rui Albuquerque, Gregory 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. JEL Classification: F30, G12, G14, G15

Keywords: asset pricing; asymmetric information; heterogenous investors; international (search for similar items in EconPapers)
Date: 2004-02
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Citations: View citations in EconPapers (4)

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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 (2005)
Working Paper: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2004)
Working Paper: International Equity Flows and Returns: A Quantitative Equilibrium Approach (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2004310

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