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Global Public Signals and Comovement of Stock Markets

Global Public Signals and Comovement of Stock Markets. Daniel Andrei Julien Cujean Sydney , December 2009. 1. Motivation. 5 min. 2. Literature. 5 min. 3. Our Model. 4. Results. 5 min. 5. Conclusions & Comments. Remaining time. Our Questions:.

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Global Public Signals and Comovement of Stock Markets

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  1. Global Public Signals and Comovement of Stock Markets Daniel Andrei Julien Cujean Sydney , December 2009

  2. 1. Motivation 5 min 2. Literature 5 min 3. Our Model 4. Results 5 min 5. Conclusions & Comments Remaining time

  3. Our Questions: • Within a rational setup, how does the volume of global public information impact comovement? • How doesirrationalitymagnifythiseffect? • How muchcomovementisgenerated by: • correlationbetweenfundamentals • global public information • irrationality • Can irrationalityproduce home equitybias?

  4. RelatedLiterature • International Finance: Information and Comovement • Dumas, Harvey and Ruiz (JIMF, 2003) • Brooks and Del Negro (JEF, 2004) • Karolyi and Stulz (JF, 1996) • Chue (2000) • Albuquerque and Vega (2008) • HeterogeneousBeliefs • Dumas, Kurshev and Uppal (JF, 2008) • Dumas, Lewis and Osambela (2009) • Grisse (2008) This Paper • Comovement • Veldkamp (RES, 2006) • Barberis, Shleifer and Wurgler (JFE,2005) • Grisse (2008) • Home Bias and Information • Brennan and Cao (JF, 1997) • Dumas, Lewis and Osambela (2009) • Veldkamp and Van Nieuwerburgh (JF, 2009)

  5. 1. Motivation 5 min 2. Literature 5 min 3. Our Model 4. Results 5 min 5. Conclusions & Comments Remaining time

  6. A B Global Signal

  7. A B Filter (Kalman-Bucy) => Filter (Kalman-Bucy) => Global Signal Benchmark Model

  8. A B Global Signal

  9. A B Global Signal HeterogeneousBeliefs

  10. 1. Motivation 5 min 2. Literature 5 min 3. Our Model 4. Results 5 min 5. Conclusions & Comments Remaining time

  11. Comovement & Rationality

  12. Comovement & Rationality

  13. Comovement & Rationality

  14. Comovement & Rationality First effect Second effect

  15. Comovement & Rationality

  16. Comovement & Irrationality

  17. Comovement & Irrationality

  18. Comovement & Irrationality

  19. Comovement & Irrationality

  20. Volatility & Irrationality

  21. Volatility & Irrationality

  22. Volatility & Irrationality

  23. Volatility & Irrationality DKU (JF, 2008) Effect

  24. Home Bias & Irrationality

  25. Home Bias & Irrationality

  26. Home Bias & Irrationality

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