Date of this Version
The Review of Financial Studies
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 of domestic investors in the interpretation of home public signals affect 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.
This is a pre-copyedited, author-produced PDF of an article accepted for publication in The Review of Financial Studies following peer review. The version of record Bernard Dumas, Karen K. Lewis, Emilio Osambela; Differences of Opinion and International Equity Markets. Rev Financ Stud 2017; 30 (3): 750-800. doi: 10.1093/rfs/hhw083 is available online at: http://dx.doi.org/10.1093/rfs/hhw083
Dumas, B., Lewis, K. K., & Osambela, E. (2017). Differences of Opinion and International Equity Markets. The Review of Financial Studies, 30 (3), 750-800. http://dx.doi.org/10.1093/rfs/hhw083
Date Posted: 27 November 2017
This document has been peer reviewed.