Home asset preference and productivity shocks

Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin, corporate governance, and host country effects

“…Issues surrounding a firm's country of origin may work to enhance investor uncertainties regarding the safety and security of their investments. For many years, finance authors have pointed to the benefits that cross-border diversification can bring to equity portfolios (Grubel, 1968;Levy and Sarnat, 1970;Solnik, 1974;Grauer and Hakansson, 1987;Eldor, Pines, and Schwartz, 1988;DeSantis and Gerard 1997;among others). Yet despite the benefits, research has also shown that investors do not always exploit such international diversification opportunities.…”

Can trade costs in goods explain home bias in assets?

“…He …nds that this generates additional home bias equal to the tax divided by the product of the rate of relative risk-aversion and the variance of the excess return. 18 The general equilibrium model employed 17 For the conditional covariance analysis, data limitations restrict the set of countries in the ROW aggregates to 14; omitted are Austria, Finland, Greece, Hong Kong, New Zealand, Portugal, and Singapore. We rely on IFS data, rather than an international real-time data set (which would greatly reduce the number of countries in the ROW aggregate).…”

“…Faust, Rogers, and Wright (2003) show that the additional explanatory power gained from using real-time rather than revised data is quite small. 18 Tille and van Wincoop (2008) also introduce this friction and obtain the same portfolio bias by Coeurdacier (2008) implies that higher trade costs reduce the variance of the excess return and therefore increase the impact of the tax on portfolio home bias. However, conditional on the observed variance of the excess return in the data, there is no link.…”

Consumption and real exchange rates in dynamic economies with non-traded goods

“…A further regularity is that many portfolios appear to be dominated by domestic assets. Eldor, Pines, and Schwartz (1988) and Stockman and Dellas (1989) use nontraded goods to account for imperfect international diversification. Engel and Kletzer (1989) and Tesar (1992) suggest, in addition, that nontraded goods may account for high correlations between savings and investment, country by country.…”