Information Diffusion in International Markets
Globalization has been a persistent phenomenon of the post-war period. The gross volume of cross-border capital flows has grown at an average of 25 percent a year, and trade in goods and services has also increased, albeit not as dramatically, but...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2003/04/2329625/information-diffusion-international-markets http://hdl.handle.net/10986/18270 |
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okr-10986-182702021-04-23T14:03:41Z Information Diffusion in International Markets Izquierdo, Alejandro Morisset, Jacques Olarreaga, Marcelo ACCOUNTING ARBITRAGE BILATERAL TRADE CAPITAL FLOWS CONSUMERS CONTAGION CURRENCY CRISES DEVELOPED COUNTRIES DEVELOPMENT INDICATORS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC PERSPECTIVES ECONOMIC REVIEW ELASTICITIES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL STUDIES EQUATIONS EQUITY MARKETS EXOGENOUS VARIABLES EXPECTED VALUE EXPORTS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FUNCTIONAL FORMS GDP GDP PER CAPITA GLOBALIZATION IMPERFECT INFORMATION IMPORTS INDUSTRIAL DEVELOPMENT INFORMATION ASYMMETRIES INSTRUCTION INTERNATIONAL TRADE LIQUIDITY MACROECONOMICS MARKET INTEGRATION MERGERS POLICY RESEARCH PRIVATE INFORMATION PRODUCTIVITY SECURITIES SECURITIES MARKETS SPILLOVERS STOCK MARKETS TELECOMMUNICATION TERMS OF TRADE TRADE BARRIERS TRADE POLICIES TRANSACTION COSTS VALUATION WEALTH INFORMATION DISSEMINATION INTERNATIONAL MARKETS GLOBALIZATION CAPITAL FLOWS TRADE COSTS IMPORTS EXPORTS DATA COLLECTING WEALTH INFORMATION DISSEMINATION Globalization has been a persistent phenomenon of the post-war period. The gross volume of cross-border capital flows has grown at an average of 25 percent a year, and trade in goods and services has also increased, albeit not as dramatically, but at least twice as fast as world GDP over the past 20 years. Yet, consumers and investors continue to spend and hold a disproportionate share of their assets in local markets-the so-called home-bias has been emphasized by many recent empirical studies. For many researchers, this home bias reflects information asymmetries and the fact that acquiring information across international borders is relatively costly. The main objective of the authors is to identify channels through which information gets disseminated across international markets. They consider three potential channels through which information can affect import and foreign equity purchase decisions in 14 OECD countries. The first channel consists of information spillovers from the commercial to the financial markets and vice-versa. Financial investors and importers share common information, which is also frequently conveyed to them by the same source-banks or financial intermediaries. The second and third channels emphasize seller and buyer reputations in international markets. The seller reputation channel stresses the importance given by, for example, importers in the United States who are considering buying products from Italy to the experience that Canadian and Japanese importers may have accumulated on Italian exporters. The buyer reputation channel examines to what extent a foreign investor or trader seeks information on the reliability of the foreign buyer by assessing his reputation in other countries. While the last two channels are equally important in explaining bilateral import flows, buyer reputation appears to be of greater importance for equity flows in the sample. The authors argue that these three channels may help provide some insights about the recent episodes of contagion across markets and countries that occurred over the past decade. These information channels can create virtuous or vicious circles that may, in turn, lead to unexpected changes in investors' and traders' behaviors across markets. 2014-05-12T20:25:10Z 2014-05-12T20:25:10Z 2003-04 http://documents.worldbank.org/curated/en/2003/04/2329625/information-diffusion-international-markets http://hdl.handle.net/10986/18270 English en_US Policy Research Working Paper;No. 3032 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ARBITRAGE BILATERAL TRADE CAPITAL FLOWS CONSUMERS CONTAGION CURRENCY CRISES DEVELOPED COUNTRIES DEVELOPMENT INDICATORS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC PERSPECTIVES ECONOMIC REVIEW ELASTICITIES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL STUDIES EQUATIONS EQUITY MARKETS EXOGENOUS VARIABLES EXPECTED VALUE EXPORTS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FUNCTIONAL FORMS GDP GDP PER CAPITA GLOBALIZATION IMPERFECT INFORMATION IMPORTS INDUSTRIAL DEVELOPMENT INFORMATION ASYMMETRIES INSTRUCTION INTERNATIONAL TRADE LIQUIDITY MACROECONOMICS MARKET INTEGRATION MERGERS POLICY RESEARCH PRIVATE INFORMATION PRODUCTIVITY SECURITIES SECURITIES MARKETS SPILLOVERS STOCK MARKETS TELECOMMUNICATION TERMS OF TRADE TRADE BARRIERS TRADE POLICIES TRANSACTION COSTS VALUATION WEALTH INFORMATION DISSEMINATION INTERNATIONAL MARKETS GLOBALIZATION CAPITAL FLOWS TRADE COSTS IMPORTS EXPORTS DATA COLLECTING WEALTH INFORMATION DISSEMINATION |
| spellingShingle |
ACCOUNTING ARBITRAGE BILATERAL TRADE CAPITAL FLOWS CONSUMERS CONTAGION CURRENCY CRISES DEVELOPED COUNTRIES DEVELOPMENT INDICATORS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC PERSPECTIVES ECONOMIC REVIEW ELASTICITIES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL STUDIES EQUATIONS EQUITY MARKETS EXOGENOUS VARIABLES EXPECTED VALUE EXPORTS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FUNCTIONAL FORMS GDP GDP PER CAPITA GLOBALIZATION IMPERFECT INFORMATION IMPORTS INDUSTRIAL DEVELOPMENT INFORMATION ASYMMETRIES INSTRUCTION INTERNATIONAL TRADE LIQUIDITY MACROECONOMICS MARKET INTEGRATION MERGERS POLICY RESEARCH PRIVATE INFORMATION PRODUCTIVITY SECURITIES SECURITIES MARKETS SPILLOVERS STOCK MARKETS TELECOMMUNICATION TERMS OF TRADE TRADE BARRIERS TRADE POLICIES TRANSACTION COSTS VALUATION WEALTH INFORMATION DISSEMINATION INTERNATIONAL MARKETS GLOBALIZATION CAPITAL FLOWS TRADE COSTS IMPORTS EXPORTS DATA COLLECTING WEALTH INFORMATION DISSEMINATION Izquierdo, Alejandro Morisset, Jacques Olarreaga, Marcelo Information Diffusion in International Markets |
| relation |
Policy Research Working Paper;No. 3032 |
| description |
Globalization has been a persistent
phenomenon of the post-war period. The gross volume of
cross-border capital flows has grown at an average of 25
percent a year, and trade in goods and services has also
increased, albeit not as dramatically, but at least twice as
fast as world GDP over the past 20 years. Yet, consumers and
investors continue to spend and hold a disproportionate
share of their assets in local markets-the so-called
home-bias has been emphasized by many recent empirical
studies. For many researchers, this home bias reflects
information asymmetries and the fact that acquiring
information across international borders is relatively
costly. The main objective of the authors is to identify
channels through which information gets disseminated across
international markets. They consider three potential
channels through which information can affect import and
foreign equity purchase decisions in 14 OECD countries. The
first channel consists of information spillovers from the
commercial to the financial markets and vice-versa.
Financial investors and importers share common information,
which is also frequently conveyed to them by the same
source-banks or financial intermediaries. The second and
third channels emphasize seller and buyer reputations in
international markets. The seller reputation channel
stresses the importance given by, for example, importers in
the United States who are considering buying products from
Italy to the experience that Canadian and Japanese importers
may have accumulated on Italian exporters. The buyer
reputation channel examines to what extent a foreign
investor or trader seeks information on the reliability of
the foreign buyer by assessing his reputation in other
countries. While the last two channels are equally important
in explaining bilateral import flows, buyer reputation
appears to be of greater importance for equity flows in the
sample. The authors argue that these three channels may help
provide some insights about the recent episodes of contagion
across markets and countries that occurred over the past
decade. These information channels can create virtuous or
vicious circles that may, in turn, lead to unexpected
changes in investors' and traders' behaviors
across markets. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Izquierdo, Alejandro Morisset, Jacques Olarreaga, Marcelo |
| author_facet |
Izquierdo, Alejandro Morisset, Jacques Olarreaga, Marcelo |
| author_sort |
Izquierdo, Alejandro |
| title |
Information Diffusion in International Markets |
| title_short |
Information Diffusion in International Markets |
| title_full |
Information Diffusion in International Markets |
| title_fullStr |
Information Diffusion in International Markets |
| title_full_unstemmed |
Information Diffusion in International Markets |
| title_sort |
information diffusion in international markets |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2003/04/2329625/information-diffusion-international-markets http://hdl.handle.net/10986/18270 |
| _version_ |
1764439183179382784 |