The Monetary Origins of Asymmetric Information in International Equity Markets

55 Pages Posted: 24 Mar 2004

See all articles by Clara Vega

Clara Vega

Board of Governors of the Federal Reserve System

Gregory H. Bauer

University of Rochester - Simon School

Multiple version iconThere are 3 versions of this paper

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

Vega, Clara and Bauer, Gregory H., The Monetary Origins of Asymmetric Information in International Equity Markets (March 22, 2004). Available at SSRN: https://ssrn.com/abstract=521022 or http://dx.doi.org/10.2139/ssrn.521022

Clara Vega (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/research/staff/vegaclarax.htm

Gregory H. Bauer

University of Rochester - Simon School ( email )

Rochester, NY 14627-0107
United States

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