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Investing at Home and Abroad: Different Costs, Different People?

We investigate US households’ direct investment in stocks, bonds and liquid accounts and their foreign counterparts, in order to identify the different participation hurdles affecting asset investment domestically and overseas. To this end, we estimate a trivariate probit model with three further selection equations that allows correlations among unobservables of all possible asset choices. Our results point to the existence of a second hurdle that stock owners need to overcome in order to invest in foreign stocks. On the other hand, we find little evidence for additional pecuniary or informational costs associated with investment in foreign bonds and liquid accounts.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 188.

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Date of creation: 01 Jan 2008
Date of revision: 10 Jan 2013
Publication status: Published in Journal of Banking and Finance, Vol. 37, 6, June 2013, pp. 2069–2086
Handle: RePEc:sef:csefwp:188
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