International diversification gains and home bias in banking
AbstractThis paper studies international diversification in banking, exploiting a bank-level dataset that covers the operations of 38 global banks and their subsidiaries overseas during 1995–2004. The paper finds that banks with a larger share of assets allocated to subsidiaries in emerging market countries were able to attain higher risk-adjusted returns. These gains were somewhat reduced by the concentration of bank subsidiaries in specific geographical regions, which is typical of the observed international expansion strategies. 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 37 (2013)
Issue (Month): 7 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
International banking; Home bias; Portfolio diversification; Basel II; Basel III;
Other versions of this item:
- Alicia GarcÃa-Herrero & Francisco F. VÃ¡zquez, 2007. "International Diversification Gains and Home Bias in Banking," IMF Working Papers 07/281, International Monetary Fund.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
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