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Australia'S Equity Home Bias

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  • ANIL V. MISHRA

Abstract

This paper constructs the float adjusted measure of home bias and explores the determinants of Australia's equity home bias by employing the International Monetary Fund's high quality dataset (2001 to 2005) on cross border equity investment. On the empirical front, the paper conducts robustness tests by employing instrumental variables that are standard in the financial economics literature. The paper finds that the share of the number of firms listed in the domestic market and the share of internet users in the total population of the host country has a significant impact on equity home bias. Trade linkages are found to have a mixed impact on equity home bias. The paper also finds that the country's market share of the world market capitalisation and transaction costs do not impact Australia's equity home bias. Investors are found to exhibit low diversification motives. Copyright 2008 The Author.

Suggested Citation

  • Anil V. Mishra, 2008. "Australia'S Equity Home Bias," Australian Economic Papers, Wiley Blackwell, vol. 47(1), pages 53-73, March.
  • Handle: RePEc:bla:ausecp:v:47:y:2008:i:1:p:53-73
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    References listed on IDEAS

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    1. Shujing Li & Hamid Faruqee & Isabel K. Yan, 2004. "The Determinants of International Portfolio Holdings and Home Bias," IMF Working Papers 04/34, International Monetary Fund.
    2. Hyuk Choe & Bong-Chan Kho & Rene M. Stulz, 2001. "Do Domestic Investors Have More Valuable Information About Individual Stocks Than Foreign Investors?," NBER Working Papers 8073, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Fenech, Jean-Pierre & Skully, Michael & Xuguang, Han, 2014. "Franking credits and market reactions: Evidence from the Australian convertible security market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 1-19.
    2. Mounira Chniguir & Mohamed Kefi & Jamel Henchiri, 2017. "The Determinants of Home Bias in Stock Portfolio: An Emerging and Developed Markets Study," Post-Print hal-01739418, HAL.
    3. repec:eco:journ1:2017-06-23 is not listed on IDEAS
    4. Mounira Chniguir & Mohamed Kefi & Jamel Henchiri, 2018. "The Determinants of Home Bias in Stock Portfolio: An Emerging and Developed Markets Study," Papers 1804.05103, arXiv.org.
    5. repec:kap:atlecj:v:45:y:2017:i:1:d:10.1007_s11293-017-9532-z is not listed on IDEAS
    6. Anil Mishra, 2014. "Foreign Ownership and Firm Value: Evidence from Australian Firms," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 21(1), pages 67-96, March.
    7. Mishra, Anil V., 2013. "Foreign ownership in Australian firms," Research in International Business and Finance, Elsevier, vol. 28(C), pages 1-18.
    8. Mishra, Anil V. & Ratti, Ronald A., 2011. "Governance, monitoring and foreign investment in Chinese companies," Emerging Markets Review, Elsevier, vol. 12(2), pages 171-188, June.
    9. Daly, Kevin & Vo, Xuan Vinh, 2013. "The determinants of home bias puzzle in equity portfolio investment in Australia," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 34-42.
    10. Mishra, Anil V., 2014. "Australia's home bias and cross border taxation," Global Finance Journal, Elsevier, vol. 25(2), pages 108-123.

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