This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Understanding international portfolio diversification and turnover rates

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Amadi, Amir A.
Bergin, Paul R.

Additional information is available for the following registered author(s):

Abstract

This paper argues that international trading costs of a fixed type can help explain home bias in international equities markets. While the stylized fact of high trading turnover in foreign holdings has been interpreted as evidence against international trading costs, we show that this argument only applies to costs that are proportional to trade, and not to fixed costs of entering the foreign market. After documenting that the home bias and turnover stylized facts remain valid in recent data, the paper constructs a simple portfolio allocation model with various configurations of trading costs. A configuration with per-unit costs heterogeneous among agents and a homogeneous fixed cost is found to replicate the pair of stylized facts.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6VGT-4M4TNRR-1/1/e9315928b96bcccb933f6b9929ae8703
File Format:
File Function:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 18 (2008)
Issue (Month): 2 (April)
Pages: 191-206
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:191-206

Contact details of provider:
Web page: http://www.elsevier.com/locate/intfin

For technical questions regarding this item, or to correct its listing, contact: (Heidi Boesdal).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. P Martin & H Rey, 2000. "Financial Integration and Asset Returns," CEP Discussion Papers dp0451, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. Pesenti, Paolo & van Wincoop, Eric, 2002. "Can Nontradables Generate Substantial Home Bias?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 25-50, February.
  3. Rowland, Patrick F., 1999. "Transaction costs and international portfolio diversification," Journal of International Economics, Elsevier, vol. 49(1), pages 145-170, October. [Downloadable!] (restricted)
  4. Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000. "Information costs and home bias: an analysis of U.S. holdings of foreign equities," International Finance Discussion Papers 691, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  5. Mark Grinblatt, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, 06. [Downloadable!] (restricted)
  6. Gian Maria Milesi-Ferretti, & Philip R. Lane, 2003. "International Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp03, IIIS. [Downloadable!]
    Other versions:
  7. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Warnock, Francis E., 2002. "Home bias and high turnover reconsidered," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 795-805, November. [Downloadable!] (restricted)
  9. Joshua Aizenman, 1999. "International Portfolio Diversification with Generalized Expected Utility Preferences," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 995-1008, August. [Downloadable!] (restricted)
    Other versions:
  10. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July. [Downloadable!] (restricted)
    Other versions:
  11. Heathcote, Jonathan & Perri, Fabrizio, 2004. "Financial globalization and real regionalization," Journal of Economic Theory, Elsevier, vol. 119(1), pages 207-243, November. [Downloadable!] (restricted)
    Other versions:
  12. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, 04. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fabrizio Perri & Jonathan Heathcote, 2007. "The International Diversification Puzzle Is Not as Bad as You Think," Working Papers 2007-3, University of Minnesota, Department of Economics, revised 08 Oct 2007. [Downloadable!]
    Other versions:
  2. Arie Kapteyn & Federica Teppa, 2009. "Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio Choice," DNB Working Papers 216, Netherlands Central Bank, Research Department. [Downloadable!]
Statistics
Access and download statistics

Did you know? You may want to explore EconPapers, which displays the same data as IDEAS in a different way.

This page was last updated on 2009-12-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.