Do investors still benefit from culturally home-biased diversification? An empirical study of China, Hong Kong, and Taiwan

Chiou, Paul; Lee, Cheng-Few

doi:10.1007/s11156-011-0257-9

Cited by 17 publications

(9 citation statements)

References 56 publications

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“…The next step is to create a time-varying measure for the diversification benefit of an investor in China when diversifying her portfolio within the ASEAN4 region. Following Li et al (2003) and Chiou and Lee (2013), we evaluate the diversification benefit in two aspects: higher return; and lower volatility.…”

Section: Diversification Benefitsmentioning

confidence: 99%

“…Following Chiou and Lee (2013), the first measure of diversification benefit with respect to increase in return per unit of risk is:…”

Section: Diversification Benefitsmentioning

confidence: 99%

“…The second measure of the benefits of diversification is the reduction in volatility that results from international diversification. According to Chiou and Lee (2013), the unpredictability of expected returns leads some investors to minimize the risk.…”

Section: Diversification Benefitsmentioning

confidence: 99%

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Financial integration and diversification benefits: China and ASEAN4 countries

Nguyen

Pana

2016

Managerial Finance

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Purpose – The strategic partnership between China and ASEAN has resulted in significant financial reforms at the country and regional level. The scale and pace of these changes call for systematic assessments of their bearing on the development and integration of financial markets in this region. The purpose of this paper is to investigate the level of financial integration of the equity markets in China and ASEAN4 countries (Indonesia, Malaysia, Philippines, and Thailand) for the period 2004-2014. Design/methodology/approach – The authors use the β and σ convergence, dynamic conditional correlation, and wavelet correlation to assess the degree, trend, and change across different time scales of the integration of China-ASEAN4 equity markets. Using two measures of change in return per unit risk and variance, we assess the difference in diversification benefits between an equity portfolio China-ASEAN4 and China-EU. Findings – The authors find that financial integration across China-ASEAN4 equity markets fluctuated between a moderate level before and after the recent crisis and a higher level during the crisis. The results indicate that investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region. Research limitations/implications – Future research should investigate whether local factors and existing cultural and political differences explain the weak to moderate level of integration of China and emerging ASEAN equity markets. Practical implications – A good understanding of the degree and evolution of the regional financial integration may be used by investors to allocate capital efficiently when adding ASEAN4 equities to a portfolio of Chinese equities. Social implications – Systematic assessments of the regional financial integration contribute to the effort to mitigate the ensuing cross-border financial contagion during crises. Originality/value – The authors argue that that the increase in correlations of CHINA-ASEAN4 equity markets during the recent crisis does not reflect a permanent shift in the dynamic of the dominant markets in the region. While investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region, the diversification benefits are lower for long-term than short-term investors.

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Section: Diversification Benefitsmentioning

confidence: 99%

“…Following Chiou and Lee (2013), the first measure of diversification benefit with respect to increase in return per unit of risk is:…”

Section: Diversification Benefitsmentioning

confidence: 99%

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Financial integration and diversification benefits: China and ASEAN4 countries

Nguyen

Pana

2016

Managerial Finance

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“…But there are regulatory and economic reasons for requiring positive weights. Chiou and Lee (2013) require positive weights but in addition place upper bounds on individual weights. While their restrictive weighting bounds sacrifice part of the diversification gains, they claim that the reduction in the temporal deviation of diversification benefits and expansion in the range of comprising assets may be appealing to asset managers.…”

Section: The Setupmentioning

confidence: 99%

A Comparison of Rebalanced and Buy and Hold Portfolios: Does Monetary Policy Matter?

Hilliard

2015

Rev. Pac. Basin Finan. Mark. Pol.

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We examine buy and hold and a number of rebalancing strategies on a portfolio of indices that are tracked by ETFs. The indices include Barkley's treasuries and MSCI indices on emerging markets, Pacific and European markets, value funds, and growth funds. Portfolios are rebalanced using threshold schemes and compared with portfolios rebalanced using weights from different points on the Markowitz efficient frontier. We also examine portfolios that are rebalanced across monetary policy regimes. We find that portfolios rebalanced using Markowitz weights that allow for shifts in monetary policy regimes easily outperform both threshold rebalancing and buy and hold strategies.

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“…They find no evidence of bond market correlations to influence foreign bias. Chiou and Lee (2013) use weekly industrylevel data to analyze culturally home-biased diversification strategies and find that local investors still benefit from regional investments.…”

Section: Introductionmentioning

confidence: 99%

Australia's Bond Home Bias

Mishra

Conteh

2014

Rev. Pac. Basin Finan. Mark. Pol.

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This paper constructs the float adjusted measure of home bias and explores the determinants of bond home bias by employing the International Monetary Fund's high quality dataset (2001 to 2009) on cross-border bond investment. The paper finds that Australian investors' prefer investing in countries with higher economic development and more developed bond markets. Exchange rate volatility appears to be an impediment for cross-border bond investment. Investors prefer investing in countries with stronger quality of institutions including bureaucratic quality, government effectiveness, regulatory quality, rule of law, efficiency of judicial system, risk of contract repudiation, and rating of accounting standards.

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Do investors still benefit from culturally home-biased diversification? An empirical study of China, Hong Kong, and Taiwan

Cited by 17 publications

References 56 publications

Financial integration and diversification benefits: China and ASEAN4 countries

Financial integration and diversification benefits: China and ASEAN4 countries

A Comparison of Rebalanced and Buy and Hold Portfolios: Does Monetary Policy Matter?

Australia's Bond Home Bias

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