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Home bias, transactions costs, and prospects for the Euro: A more detailed analysis

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  • Mann, Catherine L.
  • Meade, Ellen E.

Abstract

This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. The empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997. --

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Bibliographic Info

Paper provided by Deutsche Bank Research in its series Research Notes with number 6.

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Date of creation: 2002
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Handle: RePEc:zbw:dbrrns:6

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Keywords: portfolio choice; equity flows; exchange rates;

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Citations

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Cited by:
  1. Carol C. Bertaut & Linda S. Kole, 2004. "What makes investors over or underweight? explaining international appetites for foreign equities," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 819, Board of Governors of the Federal Reserve System (U.S.).
  2. Balli Faruk & Louis Rosmy J & Osman Mohamed A, 2009. "International Portfolio Inflows to GCC Markets: Are There Any General Patterns?," Review of Middle East Economics and Finance, De Gruyter, De Gruyter, vol. 5(2), pages 45-65, September.
  3. Viral V. Acharya & Alberto Bisin, 2005. "Optimal Financial-Market Integration and Security Design," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 78(6), pages 2397-2434, November.
  4. Faruk, Balli, 2006. "New Patterns in International Portfolio Allocation and Income Smoothing," MPRA Paper 10121, University Library of Munich, Germany, revised 14 Aug 2008.
  5. Anne Marie Gleeson & Frances Ruane, 2006. "Export dynamics in Small Open Economies: Indigenous Irish Manufacturing Exports, 1985-2003," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp140, IIIS.
  6. Philip Lane & Gian Maria Milesi-Ferretti, 2005. "The International Equity Holdings of Euro Area Investors," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp104, IIIS.

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