Over the past two decades international markets have become more open, leading to a common perception that global capital markets have become more integrated. In this paper, I ask what this integration and its resulting higher correlation would imply about the diversification potential across...

This paper presents a survey of two basic puzzles in international finance. The first puzzle is the `predictable excess return puzzle.' The returns on foreign currency deposits relative to domestic currency deposits should be equalized based upon uncovered interest parity. However, not only do...

Recent research in international business cycles based upon complete markets has found that international consumption correlations are lower than predicted by the standard risk-sharing implications of these models. In this paper, I use regression tests to ask whether two different types of...

Empirical studies of the restrictions implied by the intertemporal capital asset pricing model across different asset markets have found conflicting evidence. In general, restrictions from this model have been rejected over short holding periods, but not over longer holding periods such as a...

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 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....

The reaction of foreign stocks to cross-listing events has been documented in an extensive literature, finding that the betas of these stocks change over time. In this paper, I use stock return data for foreign companies listed on U.S. exchanges to ask whether the betas changed at all and, if...

During the period following October 1979 through 1982, the U.S. Federal Reserve allowed interest rates to fluctuate widely, in contrast to its previous policy of targeting these rates in the 1970. The policy was abandoned in 1982 in favor of an operating procedure that reduced the variation in...

The relationship between foreign exchange intervention and monetary policy underlies the question of whether sterilized interventions can affect the exchange rate. In this paper, I examine this relationship using data on U.S. foreign exchange interventions from 1985 to 1990, recently made...

This paper presents a new explanation for the negative correlation between ex post real interest rates and inflation found in earlier empirical studies. We begin by showing that there is a strong negative correlation between the permanent movements in ex post real interest rates and inflation....