IDEAS home Printed from https://ideas.repec.org/a/ids/ijbeaf/v1y2009i2p167-178.html
   My bibliography  Save this article

Equity home bias: investors' sentiments and views

Author

Listed:
  • Imtithel Sendi
  • Chaker Aloui
  • Makram Bellalah

Abstract

Modern portfolio theory suggests that the best strategy to reduce portfolio risk is to diversify internationally rather than nationally. However, despite the gains from international portfolio diversification investors still overweight their portfolios with the domestic assets. This is referred to as the 'equity home bias'. Many researches based on traditional theory fail in explaining how financial decisions are truly made. In this work, we explore behavioural finance to develop a model in which we identify a new covariance matrix and we allow investors to express sentiment and views about domestic and foreign markets separately. Our results have the potential to explain the home bias puzzle.

Suggested Citation

  • Imtithel Sendi & Chaker Aloui & Makram Bellalah, 2009. "Equity home bias: investors' sentiments and views," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(2), pages 167-178.
    • Handle: RePEc:ids:ijbeaf:v:1:y:2009:i:2:p:167-178
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=27451
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijbeaf:v:1:y:2009:i:2:p:167-178. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=237 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.