Home Bias And The High Turnover

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Home Bias And The High Turnover

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Author : Ingrid M. Werner
language : en
Publisher:
Release Date : 1992

Home Bias And The High Turnover written by Ingrid M. Werner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with categories.

This paper documents the available evidence on international portfolio investment in five GECD countries. We draw three conclusions from the data. First. there is strong evidence of a home bias in national investment portfolios despite the potential gains from international diversification. Second, to the extent investors hold international securities, the composition of the portfolio of foreign securities seems to reflect factors other than diversification of risk. Third, the high volume of cross-border capital flows and the high turnover rate on foreign equity investments relative to domestic equity markets suggests that transactions costs and incomplete information are unlikely to be important deterrents to international investment. These observations suggest that a richer set of models is required to account for international investment behavior.

Home Bias And High Turnover Reconsidered

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Author : Francis E. Warnock
language : en
Publisher:
Release Date : 2003

Home Bias And High Turnover Reconsidered written by Francis E. Warnock and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

It is a stylized fact of international finance that foreign equities are underweighted (the home bias) but overtraded (the high turnover). Since stylized facts drive research, theoretical models are now developed to explain the puzzling coexistence of home bias and high turnover, first presented in Tesar and Werner (1995), and researchers now dismiss transaction costs as a plausible explanation of home bias. I show, however, that part of the puzzle - very high turnover rates on foreign equity portfolios - is based on inaccurate estimates of cross-border holdings. Revised estimates of holdings of foreign equities from comprehensive benchmark surveys produce foreign turnover rates that are much lower than previously reported and are comparable to domestic turnover rates. The implications of this finding are clear. First, researchers should no longer develop theoretical models to explain the coexistence of home bias and high turnover. Second, the relationship between transaction costs and home bias should be reexplored. On the second point, the basic intuition from Tesar and Werner (1995) - that transaction costs do not help explain the observed home bias - is confirmed using actual data on transaction costs in 41 markets.

Home Bias And The High Turnover

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Author : Linda L. Tesar
language : en
Publisher:
Release Date : 2010

Home Bias And The High Turnover written by Linda L. Tesar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.

This paper documents the available evidence on international portfolio investment in five GECD countries. We draw three conclusions from the data. First. there is strong evidence of a home bias in national investment portfolios despite the potential gains from international diversification. Second, to the extent investors hold international securities, the composition of the portfolio of foreign securities seems to reflect factors other than diversification of risk. Third, the high volume of cross-border capital flows and the high turnover rate on foreign equity investments relative to domestic equity markets suggests that transactions costs and incomplete information are unlikely to be important deterrents to international investment. These observations suggest that a richer set of models is required to account for international investment behavior.

Travaux Pratiques De Culture

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Author :
language : en
Publisher:
Release Date : 1910

Travaux Pratiques De Culture written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1910 with categories.

Home Bias And High Turnover Reconsidered

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Author : Francis E. Warnock
language : en
Publisher:
Release Date : 2001

Home Bias And High Turnover Reconsidered written by Francis E. Warnock and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Investments, Foreign categories.

Home Bias And High Turnover In An Overlapping Generations Model With Learning

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Author : Massimo Guidolin
language : en
Publisher:
Release Date : 2005

Home Bias And High Turnover In An Overlapping Generations Model With Learning written by Massimo Guidolin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Investments, Foreign categories.

Equity Home Bias

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Author : Adam Hantak
language : en
Publisher: diplom.de
Release Date : 2011-10-20

Equity Home Bias written by Adam Hantak and has been published by diplom.de this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-10-20 with Business & Economics categories.

Inhaltsangabe:Introduction: Every investor faces the challenge of making the right investment decisions. Upon analysing the allocation of wealth among countries, it becomes evident that investors do not invest their financial wealth internationally, but tend to invest the majority of their wealth in domestic equity. Financial theory deems this behaviour irrational, since holding a domestic portfolio is considered to be suboptimal due to the foregone benefits of international diversification. Assuming that the financial theory is right in this prediction, the question as to what are the causes for this irrational behaviour comes to mind and forms the focal point of this work. One the one hand, investors may be well aware of the costs connected with holding a domestic portfolio. Market restrictions, however, do not allow investors to attain the optimal international portfolio. On the other hand, investors may be unaware of the benefits of international diversification, and instead have a preference for domestic equity and fail to perceive the domestic portfolio as suboptimal. The traditional financial theory for this behaviour provides the institutional explanations with the focus on market imperfections and the behavioural financial theory provides explanations with the focus on investor irrationality. Following this classification of both theories, this work briefly reviews institutional explanations, as many of them lack empirical evidence and concentrates mainly on the behavioural explanations, as they are the focal point of current research and find wide empirical support. After defining equity home bias and related concepts in Chapter 2, the costs of equity home bias are discussed in Chapter 3. In Chapter 4, institutional explanations are considered. Section 4.1 reviews briefly a number of older institutional explanations, such as direct investment barriers, transactions costs and taxes, as they do not find much empirical support. Section 4.2 explores in more detail an explanation based on information asymmetry, as it may at least partially contribute to the solution of the home bias problem. With the emergence and acceptance of behavioural finance new explanations based on irrationality of investors were advanced and are presented in Chapter 5. Section 5.1 explores optimistic expectations about domestic markets as one of the early behavioural explanations. Section 5.2 deals with the competence hypothesis and creates a foundation for the [...]

Home Bias And High Turnover

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Author : Viktoria V. Hnatkovska
language : en
Publisher:
Release Date : 2008

Home Bias And High Turnover written by Viktoria V. Hnatkovska and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.

Why do investors trade a lot in foreign assets and hold so little of them in their portfolios? This paper shows that both observations can arise naturally in the presence of nondiversifiable nontraded consumption risk when each country specializes in production, preferences exhibit consumption home bias, and asset markets are incomplete. Using a general equilibrium two-country, two-sector (tradable and nontradable) model of the world economy with production I show that low diversification occurs because variations in relative prices (i) increase the riskiness of foreign assets and (ii) facilitate risk-sharing across countries. Large and volatile capital flows are necessary to take advantage of international risk premia differentials that occur in response to productivity changes in the nontradable sector. I characterize the optimal portfolio holdings, the evolution of the investment opportunity set, the risk premium, and the dynamics of capital flows using a new methodology for solving dynamic general equilibrium models with incomplete markets and portfolio choice.

Equity Home Bias In International Finance

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Author : Kavous Ardalan
language : en
Publisher: Routledge
Release Date : 2019-05-17

Equity Home Bias In International Finance written by Kavous Ardalan and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-05-17 with Business & Economics categories.

This book provides a comprehensive and critical analysis of research outcomes on the equity home bias puzzle – that people overinvest in domestic stocks relative to the theoretically optimal investment portfolio. It introduces place attachment – the bonding that occurs between individuals and their meaningful environments – as a new explanation for equity home bias, and presents a philosophically multi-paradigmatic view of place attachment. For the first time, a comprehensive and up-to-date review of the extant literature is provided, demonstrating that place attachment is a contributing factor to 22 different topics in which variations of home bias are present. The author also analyses the social-psychological underpinnings of place attachment, and considers the effect of multi-culturalism on the future of equity home bias. The book’s unique approach discusses the issues in conceptual terms rather than through data and statistical methods. This multi- and inter-disciplinary book is an invaluable resource for graduate students and researchers interested in economics, finance, philosophy, and/or methodology, introducing them to a new line of research.

Does Asymmetric Information Cause The Home Equity

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Author :
language : en
Publisher: World Bank Publications
Release Date :

Does Asymmetric Information Cause The Home Equity written by and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on with categories.