International Diversification Gains And Home Bias In Banking
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International Diversification Gains And Home Bias In Banking
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Author : Alicia García-Herrero
language : en
Publisher: International Monetary Fund
Release Date : 2007-12
International Diversification Gains And Home Bias In Banking written by Alicia García-Herrero and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12 with Business & Economics categories.
This paper assembles a bank-level dataset covering the operations of 38 international banks from eight industrial countries and their subsidiaries overseas during 1995-2004, and studies the extent of diversification gains from their local operations abroad. The paper finds that international banks with a larger share of assets allocated to foreign subsidiaries, particularly to those located in emerging market countries, are able to attain higher risk-adjusted returns. These gains are somewhat reduced- but by no means depleted-when international banks concentrate their subsidiaries in specific geographical regions. The paper also finds a substantial home bias in the international allocation of bank assets, relative to the results of a mean-variance portfolio optimization model. Overall, international diversification gains in banking appear to be substantial, albeit largely unexploited by current bank expansion strategies. These results suggest that international diversification gains could usefully be considered in the second pillar of Basel II as the first pillar is based only on the idiosyncratic risk of recipient countries.
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.
The International Diversification Puzzle Home Bias In Countries Investment Portfolios
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Author : Helena Kleinert
language : en
Publisher:
Release Date : 2016
The International Diversification Puzzle Home Bias In Countries Investment Portfolios written by Helena Kleinert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
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.
International Home Bias In International Finance And Business Cycles
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Author : Karen K. Lewis
language : en
Publisher:
Release Date : 1998
International Home Bias In International Finance And Business Cycles written by Karen K. Lewis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Business cycles categories.
Domestic investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest. This phenomenon has been called equity home bias. In the absence of this home bias, investors would optimally diversify away domestic output risk. Therefore, in a world without investor home bias, consumption growth rates would tend to comove across countries even when output growth rates do not. Empirically, however, consumption growth rates tend to have a lower correlation across countries than do output growth rates. Moreover, consumption growth in each country appears to be highly correlated with its own output growth relative to the world. This phenomenon may be called consumption home bias. In this paper, I evaluate existing explanations for these two types of home bias.
The Equity Home Bias Puzzle
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Author : Ian Cooper
language : en
Publisher:
Release Date : 2013-12-01
The Equity Home Bias Puzzle written by Ian Cooper and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-12-01 with Business & Economics categories.
After an introduction, this book defines the equity home bias puzzle and explains why it is important. It also reviews the two main methods used to quantify equity home bias, the positive and normative approaches, and shows how alternative home bias measures can be constructed using variations or combinations of these two methods.
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.
The Equity Home Bias Puzzle
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Author : Ian Cooper
language : en
Publisher:
Release Date : 2013
The Equity Home Bias Puzzle written by Ian Cooper and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with International finance categories.
Home bias - the empirical phenomenon that investors assign anomalously high weights to their own domestic assets - has puzzled academics for decades: financial theory predicts that an internationally well diversified portfolio of stocks and short-term bonds can reduce risk significantly without affecting expected return. Although the globalization of international equity markets has increased international investments, equity portfolios remain severely home biased today, and no single explanation seems to solve the puzzle completely. In this paper, we first provide a thorough description of the equity home bias phenomenon by defining, discussing, and applying the competing measures and presenting some estimates of the costs of under-diversification. Second, we evaluate the explanations for the equity home bias proposed in the literature such as information asymmetries, behavioral aspects, barriers to foreign investment, and governance issues, and conclude that each explanation on its own falls short, suggesting that the equity home bias probably reflects a combination of factors. Lastly, we review the implications of international under-diversification for portfolio formation and the cost of capital of companies.
International Diversification At Home And Abroad
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Author : Fang Cai
language : en
Publisher:
Release Date : 2016
International Diversification At Home And Abroad written by Fang Cai and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We analyze foreigners' and domestic institutional investors' positions in U.S. equities. Controlling for many factors, we uncover a common preference for large firms and firms that are diversified internationally. The domestic preference for internationally diversified firms implies that investors might obtain substantial international diversification by investing at home. Using an international factor model, we show that exposure to foreign equity markets is indeed greater for domestic firms that are more diversified internationally, suggesting that at least some of the home-grown foreign.
International Capital Flows
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Author : Martin Feldstein
language : en
Publisher: University of Chicago Press
Release Date : 2007-12-01
International Capital Flows written by Martin Feldstein and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-01 with Business & Economics categories.
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.