International equity flows and returns: a quantitative equilibrium approach

Rui Albuquerque, Gregory Bauer and Martin Schneider
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Martin Schneider: Department of Economics at NYU, 269 Mercer St., 7th floor, New York, NY 10003

International Finance from University Library of Munich, Germany

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)
Pages: 73 pages
Date: 2005-08-12
Note: Type of Document - pdf; pages: 73
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Citations: View citations in EconPapers (43)

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https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0508/0508006.pdf (application/pdf)

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 quantative 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:wpa:wuwpif:0508006

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