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In this paper, we decompose attention allocation in two components –the familiar and the surprising –with opposite implications for US purchases of foreign stocks. On one hand, familiarity-induced attention leads… Click to show full abstract
In this paper, we decompose attention allocation in two components –the familiar and the surprising –with opposite implications for US purchases of foreign stocks. On one hand, familiarity-induced attention leads to an increase in US holdings of foreign equities. On the other hand, surprise-induced attention is associated with net selling of foreign stocks because US investors tend to pay more attention to negative than to positive economic surprises from other countries. Our …ndings suggest that information asymmetries between locals and non-locals are more pronounced when it comes to good news, with information regarding bad news being relatively symmetric.
Journal Title: Journal of International Money and Finance
Year Published: 2021
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