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Foreign bias in Australian-domiciled mutual fund holdings

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  • Mishra, Anil V.

Abstract

The paper employs International Capital Asset Pricing (ICAPM), Mean-variance, Global minimum variance, Bayes–Stein, Bayesian and Multi-prior models to develop foreign equity bias measures for 1414 Australian domiciled mutual funds, which invest in 41 countries worldwide. The Bayesian foreign equity measures, which take into account various degrees of mistrust in ICAPM, suggest that Australian domiciled mutual funds prefer investing in US, UK, Japan, France and Germany. The plausible sources of foreign equity bias are found to be GDP per capita, GDP growth rate, exchange rate volatility, tax, stock market development, familiarity, institution and stock characteristic variables.

Suggested Citation

  • Mishra, Anil V., 2016. "Foreign bias in Australian-domiciled mutual fund holdings," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 101-123.
    • Handle: RePEc:eee:pacfin:v:39:y:2016:i:c:p:101-123
    DOI: 10.1016/j.pacfin.2016.06.004
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    More about this item

    Keywords

    Foreign bias; Mutual fund holdings; Bayesian; ICAPM; Multi-prior; Bayes–Stein;
    All these keywords.

    JEL classification:

    • F39 - International Economics - - International Finance - - - Other
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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