A1747
Title: Asymmetric information in government bond markets: Evidence from a small, open economy
Authors: Gregory Bauer - University of Guelph (Canada) [presenting]
Sermin Gungor - Bank of Canada (Canada)
Jonathan Witmer - Bank of Canada (Canada)
Abstract: The implications of asymmetric information are explored across different investor groups in government bond yields in a small, open economy. Asymmetric information is defined as an investor's superior ability to interpret public information and make subsequent profitable trades. The evidence is based on the Canadian government bond market, where both local and global information affect domestic bond yields. Existing closed economy analyses of private information transmission potentially miss an important component of the private information story: the ability of foreign investors to trade government bonds based on the superior understanding of the global factors that affect returns in all countries. To the best of our knowledge, it is the first paper to examine the impact of informed trading of foreign investors in a bond market. A number of important questions are addressed, such as how information about domestic monetary policy actions gets transmitted across the yield curve, who benefits from superior information about policy changes, and whether international investors have superior information about both domestic and international macroeconomic announcements.
