A measure of pure home bias
Journal
Review of Finance
Subject
Finance
Publishing details
Authors / Editors
Cooper I A;Sercu P;Vanpee R
Biographies
Publication Year
2018
Abstract
The literature on international equity holdings distinguishes between home bias (overweighting of home stocks) and foreign bias (relative underweighting for more `distant' countries). The two biases can be integrated into one distance-based model. We de fine pure home bias as the excess of home bias relative to this model, and find pure home bias only in emerging markets. Countries with high tax rates and low credit standing have higher pure home bias, and more development comes with lower distance aversion. Methodologically, the choice of portfolio bias measure matters. We find the best measure to be a covariance-based measure relative to the world average.
Keywords
Home bias; Foreign bias; International equity investment
Available on ECCH
No
