TY  - JOUR
AU  - Dumas,Bernard
AU  - Lewis,Karen K.
AU  - Osambela,Emilio
TI  - Differences of Opinion and International Equity Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16726
PY  - 2011
Y2  - January 2011
UR  - http://www.nber.org/papers/w16726
L1  - http://www.nber.org/papers/w16726.pdf
N1  - Author contact info:
Bernard Dumas
INSEAD
boulevard de Constance
77305 Fontainebleau Cedex
FRANCE
Tel: +33 1 60 72 43 73
Fax:  +33 1 60 72 40 50
E-Mail: bernard.dumas@insead.edu

Karen K. Lewis
Department of Finance, Wharton School
2300 SHDH
University of Pennsylvania
Philadelphia, PA 19104-6367
Tel: 215/898-7637
Fax: 215/898-6200
E-Mail: lewisk@wharton.upenn.edu

Emilio Osambela
Tepper School of Business
Carnegie Mellon University
5000 Forbes Avenue
Pittsburgh, PA 15213
E-Mail: osambela@cmu.edu
AB  - We develop an international financial market model in which domestic and foreign residents differ in their beliefs about the information in economic signals. Similar to models of asymmetric information, we consider how informational advantages by domestic investors about local output impacts equity markets. In contrast to these models, however, all information is publicly available, but domestic investors are better equipped to understand the information in local news. We show that our model can help explain four standard international pricing anomalies: (i) home equity preference; (ii) the co-movement of returns and international capital flows; (iii) the dependence of firm returns on local and foreign factors; and (iv) abnormal returns around foreign firm cross-listing in the local market.
ER  -