iShares Australia: A clinical study in international behavioral finance

  • Durand R
  • Scott D
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Abstract

Using iShares Australia returns as a proxy for the influence of overseas investors in the Australian market, we found that U.S.-based investors in the Australian market overreact to contemporaneous and lagged returns of the U.S. equity market, the U.S.-Australian dollar exchange rate, and past iShares Australia returns. In response to changing conditional risk, however, investors behave rationally: increasing (decreasing) expected risk is associated with falling (rising) prices. In light of these findings, we hypothesize that behavioral finance might explain the observed correlations between international equity markets. © 2003 Elsevier Science Inc. All rights reserved.

Author-supplied keywords

  • Asset pricing models
  • Feedback trading
  • Overreaction
  • iShares Australia

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Authors

  • Robert B. Durand

  • Douglas Scott

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