Home Bias and the High Turnover
This paper documents the available evidence on international portfolio investment in five GECD countries. We draw three conclusions from the data. First. there is strong evidence of a home bias in national investment portfolios despite the potential gains from international diversification. Second, to the extent investors hold international securities, the composition of the portfolio of foreign securities seems to reflect factors other than diversification of risk. Third, the high volume of cross-border capital flows and the high turnover rate on foreign equity investments relative to domestic equity markets suggests that transactions costs and incomplete information are unlikely to be important deterrents to international investment. These observations suggest that a richer set of models is required to account for international investment behavior.
|Date of creation:||Nov 1992|
|Date of revision:|
|Publication status:||published as Journal of International Money and Finance, vol 14, no. 4, pp 467-492, 1995|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.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.:
- Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
- Lois E. Stekler & Edwin M. Truman, 1992. "The adequacy of the data on U.S. international financial transactions: a Federal Reserve perspective," International Finance Discussion Papers 430, Board of Governors of the Federal Reserve System (U.S.).
- French, Kenneth R. & Poterba, James M., 1991.
"Were Japanese stock prices too high?,"
Journal of Financial Economics,
Elsevier, vol. 29(2), pages 337-363, October.
- French, K.R. & Poterba, J.M., 1990. "Are Japanese Stock Prices Too High?," Working papers 547, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kenneth R. French & James M. Poterba, 1990. "Were Japanese Stock Prices Too High?," NBER Working Papers 3290, National Bureau of Economic Research, Inc.
- Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-75, September.
- Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June.
- Kenneth R. French & James M. Poterba, 1991.
"Investor Diversification and International Equity Markets,"
NBER Working Papers
3609, National Bureau of Economic Research, Inc.
- French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
- Harvey, Campbell R, 1991. " The World Price of Covariance Risk," Journal of Finance, American Finance Association, vol. 46(1), pages 111-57, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4218. 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: ()
If references are entirely missing, you can add them using this form.