Publisher Summary This chapter focuses on two puzzles related to international financial
markets. The first puzzle concerns explanations for deviations from uncovered interest parity …

Behavioral finance tries to make sense of financial data using models that are based on
psychologically accurate assumptions about people's beliefs, preferences, and cognitive …

Behavioral finance argues that some financial phenomena can plausibly be understood
using models in which some agents are not fully rational. The field has two building blocks …

The efficient markets hypothesis has been the central proposition in finance for nearly thirty
years. It states that securities prices in financial markets must equal fundamental values …

Building on Vijh (Rev. Financial Stud. 7 (1994)), we use additions to the S&P 500 to
distinguish two views of return comovement: the traditional view, which attributes it to …

Investors hold a substantially larger proportion of their wealth portfolios in domestic assets
than standard portfolio theory would suggest, a phenomenon called “equity home bias.” In …

Mexico's economic crisis in December 1994 gave renewed importance to the issue of
spillover or contagion effects in other emerging market economies (and their sensitivity to …

We examine pairs of large,Siamese twin'companies whose stocks are traded around the
world but have different trading and ownership habitats. Twins pool their cash flows, so, with …

We use panel data on prices and net asset values to test whether dramatic country‐specific
news affects the response of closed‐end country fund prices to asset value. In a typical …

Traditional asset pricing models predict that covariance between prices of different assets
should be lower than what we observe in the data. This paper introduces markets for …