Asymmetric Information, Portfolio Managers, and Home Bias
AbstractWe propose a model of delegated asset management in which individual investors are more informed about the domestic market than the foreign market and face uncertainty about quality of portfolio managers. The model shows that asymmetric information of individual investors results in home bias even if professional fund managers are equally well informed about all markets. Additionally, the model generates predictions about the size and the quality of mutual funds that are consistent with empirical studies: there are fewer mutual funds investing domestically, but their quality and market value are higher.
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Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-393.
Length: 41 pages
Date of creation: 12 Feb 2010
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Asymmetric Information; Portfolio Managers; and Home Bias;
Other versions of this item:
- Wioletta Dziuda & Jordi Mondria, 2012. "Asymmetric Information, Portfolio Managers, and Home Bias," Review of Financial Studies, Society for Financial Studies, vol. 25(7), pages 2109-2154.
- F30 - International Economics - - International Finance - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-27 (All new papers)
- NEP-CTA-2010-02-27 (Contract Theory & Applications)
- NEP-IFN-2010-02-27 (International Finance)
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- Nicolas Coeurdacier & Hélène Rey, 2011.
"Home Bias in Open Economy Financial Macroeconomics,"
NBER Working Papers
17691, National Bureau of Economic Research, Inc.
- Nicolas Coeurdacier & Hélène Rey, 2013. "Home Bias in Open Economy Financial Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 51(1), pages 63-115, March.
- Hélène Rey & Nicolas Coeurdacier, 2010. "Home bias in open economy financial macroeconomics," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
- Coeurdacier, Nicolas & Rey, Hélène, 2012. "Home Bias in Open Economy Financial Macroeconomics," CEPR Discussion Papers 8746, C.E.P.R. Discussion Papers.
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