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Financial Education, Investor Protection and International Portfolio Diversification

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Abstract

This paper investigates the tension between regulation and financial education in explaining international portfolio diversification. We show that higher investor's financial education fosters international investment and stronger minority investor protection legislation attracts inward investment. More interestingly, these factors appear to be substitute in enhancing investor's portfolio diversification: the role of financial education is particularly pronounced where information problems and monitoring costs are likely to be more severe, that is in countries where protection of minority shareholders' rights is weaker. We interpret this evidence as supportive of the conjecture that financial education lessens the informational constraints of foreign investors.

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  • Giofré, Maela, 2015. "Financial Education, Investor Protection and International Portfolio Diversification," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201547, University of Turin.
    • Handle: RePEc:uto:dipeco:201547
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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