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EMU Effects on Stock Markets: From Home Bias to Euro Bias

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  • Giofré, Maela/M.

Abstract

The shift of perspective from a national basis to a Euro area basis, inevitably induced by EMU, has led member countries to a parallel shift from equity home bias to equity Euro bias. We interpret this evidence by means of a standard mean-variance portfolio selection model modified in order to include information asymmetries, considering the effect of the EMU integration process on equity markets through informational channels, real and financial. We find a stronger informational impact of the financial channel relative to the real channel in shaping EMU countries' equity portfolios after integration.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13926.

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Date of creation: May 2008
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Handle: RePEc:pra:mprapa:13926

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Keywords: financial integration; portfolio choice; home bias; information asymmetries;

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Cited by:
  1. Balli, Faruk & Louis, Rosmy J. & Osman, Muhammed, 2009. "The Patterns of cross-border portfolio investments in the GCC region: do institutional quality and the number of expatriates play a role?," MPRA Paper 19966, University Library of Munich, Germany, revised 01 Nov 2010.
  2. Balli, Faruk & Louis, Rosmy J. & Osman, Mohammad, 2008. "International Portfolio Allocation and Income Smoothing: Evidence from Recent Changes in Euro Region," MPRA Paper 10160, University Library of Munich, Germany.
  3. Balli, Faruk & Basher, Syed Abul & Ozer-Balli, Hatice, 2010. "From home bias to Euro bias: Disentangling the effects of monetary union on the European financial markets," Journal of Economics and Business, Elsevier, vol. 62(5), pages 347-366, September.

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