The Monetary Origins of Asymmetric Information in International Equity Markets
55 Pages Posted: 24 Mar 2004
There are 3 versions of this paper
The Monetary Origins of Asymmetric Information in International Equity Markets
The Monetary Origins of Asymmetric Information in International Equity Markets
The Monetary Origins of Asymmetric Information in International Equity Markets
Date Written: March 22, 2004
Abstract
Previous 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 identify better the effects of private and public information shocks about US monetary policy 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 an important economic fundamental is useful for many domestic and international asset pricing tests.
Keywords: Private information, international equity returns, monetary policy, foreign exchange rates, exchange traded funds
JEL Classification: G12, G15, G14, D82, E52, F30
Suggested Citation: Suggested Citation
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