Existing studies using low-frequency data have found that macroeconomic shocks
contribute little to international stock market covariation. However, these papers
have not accounted for the presence of asymmetric information where sophisticated
investors generate private information about the fundamentals that drive returns
in many countries. In this paper, we use a new microstructure data set to better
identify the effects of private and public information shocks about U.S. interest
rates and equity returns. High-frequency private and public information shocks
help forecast domestic money and equity returns over daily and weekly intervals.
In addition, these shocks are components of factors that are priced in a model
of the cross section of international returns. Linking private information to U.S.
macroeconomic factors is useful for many domestic and international asset pricing
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Last update: December 20, 2006