4 Non-technical summary 5 1 Introduction 7 2 Related literature 11 3 The model 14 3.1 Setup 14 3.2 Stationary equilibria 18 4 Characterizing equilibrium flows and returns 19 4.1 The evolution of beliefs 20 4.2 Optimal portfolio choice 22 4.3 Equilibrium prices, predictability and hedging 24 4.4 Equilibrium flows and returns 26 5 Data 29 5.1 Dividends 29 5.2 Equity flows 32 5.2.1 Data sources 32...

An extensive literature has found that individuals favor investments that they are more familiar with and are geographically proximate. Familiarity bias implies that foreign investors may perceive lower expected payoff and/or higher risk for domestic firm’s asset payoffs. This paper explores how a firm issues different securities across borders in segmented international financial markets under...

This paper examines the value relevance of Local Accounting Standards (LAS) earnings and their voluntarily disclosed reconciliations to the International Accounting Standards (IAS). The empirical evidence is from Finland where, as discussed in our paper, restricted shares (available only to domestic investors) and unrestricted shares (available to both foreign and domestic investors) were liste...

Foreign investors generally underperform domestic investors in trading activities. This study shows that their inferior performance is attributable to non-initiated orders. Foreign investors actually perform better than domestic investors in initiated orders. In addition, their performance is also mixed when trades are classified depending on who the counterparties are. These mixed performances...

Business groups, the leading economic players in emerging economies, have responded to the market‐oriented transition primarily through corporate restructuring. Agency theory predicts that acquisition and divestiture would serve the interests of dominant families and foreign investors in different ways. Further, dominant families, foreign investors from shareholder‐based countries, and foreign ...

We study the investment behavior of foreign investors in association with an equity market liberalization, and find a strong link between foreigners trading and local market returns. In the period following the liberalization, net purchases by foreign investors induced a permanent increase in stock prices, suggesting that local firms reduced their cost of equity capital. We also find a strong l...

Despite the political sensitivity of foreign capital, existing work on the effect of foreign capital at the firm level is slim. This paper examines the effect of foreign equity ownership and management on firm performance using a panel of Korean firms for the period of 1993-2007 when foreign capital inflows increased dramatically. Empirical results show that foreign equity ownership positively ...

Many explanations for home or local bias rely on information asymmetry: investors know more about their home assets. A criticism of these theories is that asymmetry should disappear when information is tradable. This criticism is flawed. If investors have asymmetric prior beliefs, but choose how to allocate limited learning capacity before investing, they will not necessarily learn foreign info...

This study analyses the information diffusion between Chinese A shares (restricted to domestic investors) and B shares (restricted to foreign investors). The results show that there is an important long-run information diffusion between A and B shares. In the Shanghai stock market, information flows from foreign to domestic investors. However, in the smaller and less liquid Shenzhen stock marke...