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The determinants of international investment and attention allocation: Using internet search query data

  • Mondria, Jordi
  • Wu, Thomas
  • Zhang, Yi

This paper explores the joint determination of home bias and attention allocation. We overcome the typical challenge associated with evaluating attention allocation theories by using a new internet search query dataset to measure how much information investors decide to process. Employing an instrumental variables approach, we find empirical evidence of a two-way causality between home bias and attention. Our estimates suggest that if all countries were to receive the same level of attention as the U.S., then the average home bias by U.S. investors would fall from 85.2% to 57.3%.

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File URL: http://www.sciencedirect.com/science/article/B6V6D-501073C-1/2/0d6375d5a9479db9d0a32ecc0df2e594
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 82 (2010)
Issue (Month): 1 (September)
Pages: 85-95

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Handle: RePEc:eee:inecon:v:82:y:2010:i:1:p:85-95
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  23. Mondria, Jordi, 2010. "Portfolio choice, attention allocation, and price comovement," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1837-1864, September.
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  25. Laura Veldkamp & Stijn Van Nieuwerburgh, 2005. "Information Acquisition and Portfolio Underdiversification," 2005 Meeting Papers 77, Society for Economic Dynamics.
  26. Xavier Gabaix & David Laibson, 2002. "The 6D Bias and the Equity Premium Puzzle," Harvard Institute of Economic Research Working Papers 1947, Harvard - Institute of Economic Research.
  27. Kalok Chan & Vicentiu Covrig & Lilian Ng, 2005. "What Determines the Domestic Bias and Foreign Bias? Evidence from Mutual Fund Equity Allocations Worldwide," Journal of Finance, American Finance Association, vol. 60(3), pages 1495-1534, 06.
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