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Biases in international portfolio allocation and investor protection standards

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  • Kwabi, Frank O.
  • Thapa, Chandra
  • Paudyal, Krishna
  • Adegbite, Emmanuel

Abstract

Economic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors.

Suggested Citation

  • Kwabi, Frank O. & Thapa, Chandra & Paudyal, Krishna & Adegbite, Emmanuel, 2017. "Biases in international portfolio allocation and investor protection standards," International Review of Financial Analysis, Elsevier, vol. 53(C), pages 66-79.
    • Handle: RePEc:eee:finana:v:53:y:2017:i:c:p:66-79
    DOI: 10.1016/j.irfa.2017.08.005
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    Cited by:

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    2. Garg, Jyoti & Karmakar, Madhusudan & Paul, Samit, 2023. "A study on equity home bias using vine copula approach," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    3. Frank Kwabi & Agyenim Boateng & Samuel Fosu & TingTing Zhu & Marian Chijoke‐Mgbame, 2022. "Foreign equity portfolio flow and corruption: A cross‐country evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 68-87, January.
    4. Lihuan Guo & Dongqiang Guo & Wei Wang & Hongwei Wang & Yenchun Jim Wu, 2018. "Distance Diffusion of Home Bias for Crowdfunding Campaigns between Categories: Insights from Data Analytics," Sustainability, MDPI, vol. 10(4), pages 1-22, April.

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    More about this item

    Keywords

    Financial globalization; Investor protection standards; Equity home bias; Equity foreign bias;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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