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

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Author Info
Giofré, Maela/M.

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

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Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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References listed on IDEAS
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  2. Ted Juhl & William Miles & Marc D. Weidenmier, 2004. "Covered Interest Arbitrage: Then vs. Now," NBER Working Papers 10961, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. 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!]
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  17. Portes, Richard & Rey, Helene & Oh, Yonghyup, 2001. "Information and capital flows: The determinants of transactions in financial assets," European Economic Review, Elsevier, vol. 45(4-6), pages 783-796, May. [Downloadable!] (restricted)
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  23. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June. [Downloadable!] (restricted)
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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. 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. [Downloadable!]
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