International portfolio diversification and the home bias puzzle

Liu, Junyong; Lee, Kyounghun; Oh, Frederick Dongchuhl

doi:10.1016/j.ribaf.2022.101807

Cited by 15 publications

(4 citation statements)

References 148 publications

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“…Group statistic and Equality of group mean testindicated that female investors tend to exhibit higher levels of overconfidence and anchoring biases, while male investors tend to exhibit higher levels of loss aversion, herding, and hindsight biases. This finding is consistent with the work of Levišauskaitė and Kartašova (2011) and Lee, Miller, Velasquez and Wann (2013), but contradicts previous research by Jaiswal and Kamil (2012), Onsomu (2014), and Willows and West (2015) who found that men were more overconfident than women. Younger investors tend to exhibit more overconfidence and loss aversion biases, while experienced investors tend to be more overconfident, aligning with research by Lin (2011), Zaidi and Tauni (2012), Murithi (2014) but contradicting the findings of Qadri and Shabbir (2014) who found no relationship between experience and overconfidence, and Bashir et al (2013) who found experienced investors to have high herding behavior.…”

Section: Discussion Discussionsupporting

confidence: 86%

Behavioral Biases and Portfolio Strategies: Analyzing the Impact on Investor Decision Making in the Nepalese Stock Market

Nepal,

Gyawali

2023

CJFA

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Our paper explored the impact of demographic variables on the manifestation of behavioral biases among Nepalese portfolio investors as they make investment decisions. Our research analyzed the relationship between age, gender, and experience, and five common biases such as overconfidence, anchoring, herding, loss aversion, and hindsight. Our survey of 132 investors revealed that demographic factors play a role in the presence of these biases, with female investors exhibiting higher overconfidence and anchoring biases, while male investors displayed loss aversion, herding, and hindsight biases. Younger investors were found to be more overconfident and prone to loss aversion, whereas more experienced investor demonstrated greater overconfidence in their analysis skills. This paper provides crucial insight into the importance of considering demographic factors in addressing investment decision-making biases. It’s worth noting that the responses and sample location may not be fully representative.

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Section: Discussion Discussionsupporting

confidence: 86%

Behavioral Biases and Portfolio Strategies: Analyzing the Impact on Investor Decision Making in the Nepalese Stock Market

Nepal,

Gyawali

2023

CJFA

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“…Guo, Bayer, and Blair (2013) have investigated the utilization of Stock-Trak in Executive MBA education. Lee et al (2013) have used Stock-Trak to differentiate between male and female students' behaviors which in turn affect how they perform. Wann and Lobo (2010) demonstrated that male students were more overconfident than female students (i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

Experiential Learning Through the Creation of an Investment Lab

Kaya

Kwok

LaTurner

2023

FMIR

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In this paper, using our actual experience as finance faculty, we go over the steps to build and run an Investment Lab at University. First, we explain how the curriculum may be changed in order to accommodate this experiential learning opportunity in a finance undergraduate program. We explain how a new course oriented towards portfolio management may be created. Next, we describe how the student body may benefit from this initiative. Why is an Investment Lab needed at a university? What are the disadvantages of not having an Investment Lab (i.e. losing market share to competition, not bridging between theory and practice, and so on)? What is the solution to these problems? We explain that the solution possibly requires a new “Applied Portfolio Management Concentration/Minor”. As an example, we show what courses may be included under this new minor. Then, we go over the operational plan, including the business plan. We propose the establishment of a four-course minor, the lab, and a student managed fund. We explain how the whole operation will be financed. Then, we present the timeline and explain what needs to be done throughout the whole process. Finally, we go over the costs in detail. We believe that this paper will help other universities that would like to start an Investment Lab.

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“…The factors affecting this ratio and their relative weights in determining stock prices remain largely unexplored. Despite home bias in portfolios and markets that remain partly segmented, it is noticeable that international allocations by fund managers have been increasing due to improved access to financial advice and lower fees (Lee et al , 2023). Hence, as investors and fund managers appreciate easier selection of countries to internationally diversify their portfolios, they would greatly benefit by knowing what governs the PEs of such countries.…”

Section: Introductionmentioning

confidence: 99%

International price earnings and country risk model in an Asian context

Arayssi

Yassine

2023

JABS

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Purpose This paper aims to estimate a statistical model of the country risk determination as represented by the country price earnings ratio (PE) to identify potentially mispriced countries. It uses the gross domestic product (GDP) growth rate and a dummy indicator for market-related events (i.e. financial crises), both approximating the business cycle. The model is used to compare a major Asian country’s (i.e. Japan) risk with Western countries’ risk. Design/methodology/approach The model used finance variables such as the systemic, non-diversifiable, risk and foreign direct investments to characterize any country risk. A random effects model with panel data estimated the effects of macroeconomic and financial variables on PE. The simultaneity problem was checked using two stage least squares and some lagged independent variables. Findings The results explained to investors the country risk contributing factors: PE was positively correlated with variables that may increase dividends and market risk premia similar to GDP growth rates and total risk and negatively correlated with variables that increase market risk, namely, nominal risk-free interest rates and financial crises. Japan’s PE seemed to exceed most of the Western countries considered here, implying lower risks, lower interest rates and higher growth in the major Asian country Japan. Originality/value This paper focuses on the effectiveness of country risk measures in predicting periods of intense instability, similar to financial crises. This study contributes a model to measure market risk premium, using PE (or inversely, the earnings yield) as a proxy variable. Investors can use this risk measure in picking less risky stocks to include in their portfolio, calling for liberalizing Asian countries’ financial markets to improve their stock market capitalization.

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International portfolio diversification and the home bias puzzle

Cited by 15 publications

References 148 publications

Behavioral Biases and Portfolio Strategies: Analyzing the Impact on Investor Decision Making in the Nepalese Stock Market

Behavioral Biases and Portfolio Strategies: Analyzing the Impact on Investor Decision Making in the Nepalese Stock Market

Experiential Learning Through the Creation of an Investment Lab

International price earnings and country risk model in an Asian context

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