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

Jordi Mondria () and Thomas Wu
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Thomas Wu: University of California, Santa Cruz

No 50, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper, we decompose attention allocation in two components -- the familiar and the surprising -- with opposite implications for US purchases of foreign stocks. On 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 other 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.

Date: 2012
New Economics Papers: this item is included in nep-cba
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:50

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