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The monetary origins of asymmetric information in international equity markets

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Gregory H. Bauer
Clara Vega

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Abstract

Existing studies using low-frequency data have found that macroeconomic shocks contribute little to international stock market covariation. However, these papers have not accounted for the presence of asymmetric information where sophisticated investors generate private information about the fundamentals that drive returns in many countries. In this paper, we use a new microstructure data set to better identify the effects of private and public information shocks about U.S. interest rates and equity returns. High-frequency private and public information shocks help forecast domestic money and equity returns over daily and weekly intervals. In addition, these shocks are components of factors that are priced in a model of the cross section of international returns. Linking private information to U.S. macroeconomic factors is useful for many domestic and international asset pricing tests.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 872.

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Date of creation: 2006
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Keywords: International finance ; Stock exchanges;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Albuquerque, Rui & de Francisco, Eva & Marques, Luis, 2006. "Marketwide Private Information in Stocks: Forecasting Currency Returns," CEPR Discussion Papers 5604, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Joshua Hausman & Jon Wongswan, 2006. "Global asset prices and FOMC announcements," International Finance Discussion Papers 886, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Oreste Napolitano, 2006. "Is the Impact of ECB Monetary Policy on EMU Stock Market Returns asymmetric?," Discussion Papers 1_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
    Other versions:
  4. Jon Wongswan, 2005. "The response of global equity indexes to U.S. monetary policy announcements," International Finance Discussion Papers 844, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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