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Global Public Signals and Comovement of Stock Markets

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Presentation on theme: "Global Public Signals and Comovement of Stock Markets"— Presentation transcript:

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

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

3

4

5 Our Questions: Within a rational setup, how does the volume of global public information impact comovement? How does irrationality magnify this effect? How much comovement is generated by: correlation between fundamentals global public information irrationality Can irrationality produce home equity bias?

6 This Paper Related Literature
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) Heterogeneous Beliefs 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)

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

8 A B Global Signal

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

10 A B Global Signal

11 Heterogeneous Beliefs
A B Global Signal Heterogeneous Beliefs

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

13 Comovement & Rationality

14 Comovement & Rationality

15 Comovement & Rationality

16 Comovement & Rationality
First effect Second effect

17 Comovement & Rationality

18 Comovement & Irrationality

19 Comovement & Irrationality

20 Comovement & Irrationality

21 Comovement & Irrationality

22

23 Volatility & Irrationality

24 Volatility & Irrationality

25 Volatility & Irrationality

26 Volatility & Irrationality
DKU (JF, 2008) Effect

27 Home Bias & Irrationality

28 Home Bias & Irrationality

29 Home Bias & Irrationality


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