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Differences of Opinion and International Equity Markets

Listed author(s):
  • Bernard Dumas
  • Karen K. Lewis
  • Emilio Osambela
Registered author(s):

    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 by domestic investors in the interpretation of home public signals impact 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.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16726.

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    Date of creation: Jan 2011
    Publication status: published as "Differences of Opinion and International Equity Markets," with K. K. LEWIS and E. OSAMBELA, Review of Financial Studies, 30 (2017), 750-800.
    Handle: RePEc:nbr:nberwo:16726
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