Human Capital, Endogenous Information Acquisition,and Home Bias in Financial Markets
Considerable attention has been devoted in the financial literature to excessive portfolio concentrations in domestic risky assets relative to those predicted by standard finance models-generally identified as"home bias"-across international markets. The innovation we offer is ascribing home bias to endogenous information acquisition, or"asset management"(see EHY 2008), resulting from variations in human capital endowments. We develop discriminating hypotheses about the roles of"specific" and"general"human capital endowments and the direct and opportunity costs of asset management in determining how home bias varies among individual investors and across financial markets. Our model also provides insights concerning differences across countries in the degree to which their domestic asset prices are"information revealing".These hypotheses are tested against 8 national probability samples of individual portfolio compositions in the US over 1992-2007, and 7 international samples over 2001-2007 including 23 countries. The findings are consistent with our hypotheses.
|Date of creation:||Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Isaac Ehrlich & William A. Hamlen Jr. & Yong Yin, 2008.
"Asset Management, Human Capital, and the Market for Risky Assets,"
NBER Working Papers
14340, National Bureau of Economic Research, Inc.
- Isaac Ehrlich & William A. Hamlen Jr. & Yong Yin, 2008. "Asset Management, Human Capital, and the Market for Risky Assets," Journal of Human Capital, University of Chicago Press, vol. 2(3), pages 217-262.
- Yamarik Steven J, 2008. "Estimating Returns to Schooling from State-Level Data: A Macro-Mincerian Approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-16, August.
- Stijn Van Nieuwerburgh & Laura Veldkamp, 2007.
"Information Immobility and the Home Bias Puzzle,"
NBER Working Papers
13366, National Bureau of Economic Research, Inc.
- Laura Veldkamp & Stijn Van Nieuwerburgh, 2005. "Information Immobility and the Home Bias Puzzle," 2005 Meeting Papers 78, Society for Economic Dynamics.
- Laura Veldkamp & Stijn Van Nieuwerburgh, 2004. "Information Immobility and the Home Bias Puzzle," Working Papers 04-32, New York University, Leonard N. Stern School of Business, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:202010. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR)
If references are entirely missing, you can add them using this form.