Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 240: The Informational Advantage of Foreign Investors: An Empirical Study of the Swedish Bond Market

Patrik Säfvenblad ()
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Patrik Säfvenblad: Dept. of Finance, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: This paper uses daily capital flows to the Swedish bond market to analyse the relative information endowment of domestic and foreign investors. Using the standard framework of a noisy rational expectations equilibrium it is shown that foreign investors are, on average, better informed than domestic investors. The better information of foreign investors is related to pan-European factors, including ITL bond yields, future order flow, as well as pure Swedish factors.

Keywords: bond prices; capital flows; foreign investors; informed investors; interest rate determination

JEL-codes: E43; G12; G14; G15

11 pages, May 31, 1998

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