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Foreign exposure through domestic equities

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  • Cai, Fang
  • Warnock, Francis E.
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    Abstract

    We show that US investors obtain substantial foreign exposure through their holdings of domestic equities. Domestic multinationals, in particular, provide significant foreign exposure. We also find that, although the average US investor is less tilted toward domestic multinationals, institutional investors do overweight domestic firms that are more internationally oriented. ‘Indirect’ foreign holdings through domestic multinationals are shown to be substantial; combining them with reported data on international positions almost doubles US investors’ total ‘foreign’ holdings. Our findings indicate that the home bias is not as severe as assessments based on reported international investment statistics suggest.

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    Bibliographic Info

    Article provided by Elsevier in its journal Finance Research Letters.

    Volume (Year): 9 (2012)
    Issue (Month): 1 ()
    Pages: 8-20

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    Handle: RePEc:eee:finlet:v:9:y:2012:i:1:p:8-20

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    Web page: http://www.elsevier.com/locate/frl

    Related research

    Keywords: Home bias; International portfolio allocation; Multinationals;

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    Cited by:
    1. Stephanie E. Curcuru & Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2014. "Uncovered Equity Parity and Rebalancing in International Portfolios," NBER Working Papers 19963, National Bureau of Economic Research, Inc.
    2. Curcuru, Stephanie E. & Thomas, Charles P. & Warnock, Francis E. & Wongswan, Jon, 2014. "Uncovered Equity Parity and Rebalancing in International Portfolios," International Finance Discussion Papers 1103, Board of Governors of the Federal Reserve System (U.S.).

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