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 by domestic investors in the interpretation of home public signals impact equity markets....

We review the international finance literature to assess the extent to which international factors affect financial asset demands and prices. International asset-pricing models with mean-variance investors predict that an asset's risk premium depends on its covariance with the world market...

We analyze a model where different traders are informed of different fundamentals that affect the security value. We identify a source for strategic complementarities in trading and information acquisition: The aggressive trading on information about one fundamental reduces the uncertainty in...

Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries' external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP's currency composition, we find that...

This paper examines the patterns of intraday cojumps between international equity markets as well as their impact on international asset holdings and portfolio diversification benefits. Using intraday index-based data for exchange-traded funds as proxies for international equity markets, we...

The weak empirical evidence linking diversification and international equity flows calls into question the diversification paradigm at the international level and the analytical framework it implies. Using a novel measure of diversification that includes all the moments of the distribution of...

The aim of this paper is to investigate the behavior of international equity returns and correlations using the discrete-time Markov-switching model and the impact of this behavior on international portfolio choices. We take the perspective of a US-based global investor who considers investment...

I explore the benefits of incorporating conditional higher moments in the international portfolio allocation. The quantile-based conditional higher moments are robust to the outliers and exhibit considerable time-variation and heterogeneity across countries. My empirical evidence shows that...

We introduce a portfolio friction in a two-country DSGE model where investors face a constant probability to make new portfolio decisions. The friction leads to a more gradual portfolio adjustment to shocks and a weaker portfolio response to changes in expected excess returns. We apply the model...

This paper reconsiders the role of foreign investors in developed country equity markets. It presents a quantitative model of trading that is built around two new assumptions about investor sophistication: (i) both the foreign and domestic populations contain investors with superior information...