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The Equity Home Bias Puzzle

2013 International finance
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Release : 2013
Genre : International finance
Kind : eBook
Book Rating : 631/5 ( reviews)

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Book Synopsis The Equity Home Bias Puzzle by : Ian Cooper

Download or read book The Equity Home Bias Puzzle written by Ian Cooper. This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Coordinated Portfolio investment Survey

1997-01-01 Business & Economics
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Release : 1997-01-01
Genre : Business & Economics
Kind : eBook
Book Rating : 569/5 ( reviews)

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Book Synopsis Coordinated Portfolio investment Survey by : International Monetary Fund

Download or read book Coordinated Portfolio investment Survey written by International Monetary Fund. This book was released on 1997-01-01. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a coordinated portfolio investment survey guide provided to assist national compilers in the conduct of the Coordinated Portfolio Investment Survey, conducted under the auspices of the IMF with reference to the year-end 1997. The guide covers a variety of conceptual issues that a country must address when conducting a survey. It also covers the practical issues associated with preparing for a national survey. These include setting a timetable, taking account of the legal and confidentiality issues raised, developing a mailing list, and maintaining quality control checks.

A Rational Explanation for Home Country Bias

2010
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Release : 2010
Genre :
Kind : eBook
Book Rating : /5 ( reviews)

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Book Synopsis A Rational Explanation for Home Country Bias by : Iftekhar Hasan

Download or read book A Rational Explanation for Home Country Bias written by Iftekhar Hasan. This book was released on 2010. Available in PDF, EPUB and Kindle. Book excerpt: While modern portfolio theory predicts that investors should diversify across international markets, corporate equity is essentially held by domestic investors. French and Poterba (1991) suggest that in order for this bias to be justified, investors must hold optimistic expectations about their domestic markets and pessimistic expectations about their foreign markets. Tesar and Werner (1995) find existing explanations to the home equity bias unsatisfactory and conclude that the issue poses a challenge for portfolio theory. We develop a model that incorporates both the foregone gains from diversification and the informational constraints of international investing, and shows that home equity bias is consistent with rational mean-variance portfolio choice. Specifically, we prove that the nature of estimation risk in international markets can be responsible for this phenomenon. We show that when the cross-market variability in the estimation errors of international markets' means far exceeds the cross-market variability in the means themselves, domestic dedication dominates international diversification. An examination of eleven international markets' returns over the last twenty-five years, from the perspective of German, Japanese and U.S investors provides evidence consistent with this explanation.

Get Started Investing

2021-08-31 Business & Economics
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Release : 2021-08-31
Genre : Business & Economics
Kind : eBook
Book Rating : 670/5 ( reviews)

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Book Synopsis Get Started Investing by : Alec Renehan

Download or read book Get Started Investing written by Alec Renehan. This book was released on 2021-08-31. Available in PDF, EPUB and Kindle. Book excerpt: The founders of Australia's #1 finance podcast network, Equity Mates, show how you can tap into the awesome power of the stockmarket - it's easier than you think! Does the stock market seem too complicated? Do you think that investing is only for those with more money? Do you want to start investing but don't know where to begin? This is the guide to investing you've been waiting for. Investing in the stock market has never been more accessible. Alec and Bryce show why the stock market has been the most powerful money-making machine that has ever existed and how you can access it with just a few spare dollars. They break down the jargon and give you all the information you need to build the confidence to get started today. They explain how to use online investment platforms, managed funds and exchange-traded funds, what to invest in and what to avoid, how to keep it simple, and why the biggest risk is not investing. Get Started Investing draws on advice from over 150 expert investors from around the world, and stories from everyday small investors just like you. Whether you're in school, building your career or nearing retirement, Alec and Bryce will help to make your money work for you. 'I'm a massive fan of these two blokes. They cut through the jargon to help anyone switch from being a saver to an investor. Saving to invest is how real wealth is built.' DAVID KOCH, TV presenter 'I wish I'd read this book 15 years ago! A perfect start for any beginner who is thinking about investing. It's a must-read for anyone who's scared of the stock market, like I was.' USMAN KHAWAJA, Test cricketer

The Internationalization of Equity Markets

2008-04-15 Business & Economics
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Release : 2008-04-15
Genre : Business & Economics
Kind : eBook
Book Rating : 216/5 ( reviews)

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Book Synopsis The Internationalization of Equity Markets by : Jeffrey A. Frankel

Download or read book The Internationalization of Equity Markets written by Jeffrey A. Frankel. This book was released on 2008-04-15. Available in PDF, EPUB and Kindle. Book excerpt: This timely volume addresses three important recent trends in the internationalization of United States equity markets: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization as countries such as Japan come to rely more than ever before on markets in equities and bonds at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions, as governments remove capital controls and other barriers. Eight essays examine such issues as the current extent of international market integration, gains to U.S. investors through international diversification, home-country bias in investing, the role of time and location around the world in stock trading, and the behavior of country funds. Other, long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances, and the price of risk according to the Capital Asset Pricing Model.

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