Differences of Opinion and International Equity Markets

Dumas, Bernard; Lewis, Karen K.; Osambela, Emilio

doi:10.1093/rfs/hhw083

Cited by 58 publications

(30 citation statements)

References 84 publications

(77 reference statements)

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“…settings would add even more complexity. One recent work accomplishing tractability in a related two-country international finance setting is Dumas, Lewis, and Osambela (2017). 21 Modeling individual and aggregate cash-flow news as geometric Brownian motions is somewhat in the spirit of Brennan and Xia (2001).…”

Section: Multiple-stock Economymentioning

confidence: 99%

Belief Dispersion in the Stock Market

Atmaz¹,

Basak

2018

The Journal of Finance

171

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We develop a dynamic model of belief dispersion with a continuum of investors differing in beliefs. The model is tractable and qualitatively matches many of the empirical regularities in a stock price and its mean return, volatility, and trading volume. We find that the stock price is convex in cash‐flow news and increases in belief dispersion, while its mean return decreases when the view on the stock is optimistic, and vice versa when pessimistic. Moreover, belief dispersion leads to higher stock volatility and trading volume. We demonstrate that otherwise identical two‐investor heterogeneous‐beliefs economies do not necessarily generate our main results.

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Section: Multiple-stock Economymentioning

confidence: 99%

Belief Dispersion in the Stock Market

Atmaz¹,

Basak

2018

The Journal of Finance

171

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“…Lewis, and Osambela (2011) adopt such a conceptual framework to analyze equilibrium dynamics of international equity flow.…”

mentioning

confidence: 99%

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Jia

Wang

Xiong

2015

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“…Return-chasing has been confirmed by subsequent studies using U.S. bilateral flows (Froot et al, 2001;Griffin et al, 2004;Richards, 2005;Froot and Ramadorai, 2008) and U.S. portfolio holdings data (Froot et al, 2001;Froot and Ramadorai, 2008). The return-chasing hypothesis has been embedded in various theoretical models (Brennan and Cao, 1997;Guidolin, 2005;Albuquerque et al, 2007Albuquerque et al, , 2009Dumas et al, 2014). Analyzing monthly portfolio holdings, Curcuru et al (2011Curcuru et al ( , 2014 instead find that U.S. equity investors neither chase equity returns nor buy past losers but rather they just tend to sell past winners -a form of partial portfolio rebalancing.…”

Section: Introductionmentioning

confidence: 85%

Uncovered Equity 'Disparity' in Emerging Markets

Fuertes

Phylaktis

Yan³

2017

SSRN Journal

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The portfolio-rebalancing theory of Hau and Rey (2006) yields the uncovered equity parity (UEP) prediction that local-currency equity return appreciation is offset by currency depreciation. Vector autoregressive model estimation and tests for eight Asian emerging markets using daily data reveal instead a positive nexus between equity returns and currency returns. The extent of the uncovered equity "disparity" is time-varying and asymmetric since it exacerbates in crises. Our analysis suggests that the UEP failure is primarily due to investors' return-chasing behavior. Robustness checks confirm that this explanation of the uncovered equity "disparity" is more appropriate than existing flight-to-safety or market risk conjectures.

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Differences of Opinion and International Equity Markets

Abstract: NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Cited by 58 publications

References 84 publications

Belief Dispersion in the Stock Market

Belief Dispersion in the Stock Market

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Uncovered Equity 'Disparity' in Emerging Markets

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