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Home Bias (home + bias)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	82%
Humanities and Social Sciences	17%

Selected Abstracts

AN INVESTIGATION OF HOME BIAS IN SUPERANNUATION INVESTMENT CHOICES

ECONOMIC PAPERS: A JOURNAL OF APPLIED ECONOMICS AND POLICY, Issue 1 2006
PAUL GERRANS
Australian superannuation funds have increased investment choices available for their members. Fund members can typically choose from a range of ready-made options or select their own asset allocations. Evidence suggests that individuals may display a home bias in these allocations by favouring domestic assets at the expense of international assets. Such a bias may produce a sub-optimal investment. This paper investigates the asset allocations of members of the Government Employees Superannuation Board (GESB), the superannuation fund for Western Australian public sector employees. Asset allocations appear to be in line with a normal allocation to international equity, especially at the time of their first choice. Subsequent choices however appear to be driven more by historical performance of the asset classes offered, rather than by a home bias. [source]

AUSTRALIA'S EQUITY HOME BIAS

AUSTRALIAN ECONOMIC PAPERS, Issue 1 2008
ANIL V. MISHRA
This paper constructs the float adjusted measure of home bias and explores the determinants of Australia's equity home bias by employing the International Monetary Fund's high quality dataset (2001 to 2005) on cross border equity investment. On the empirical front, the paper conducts robustness tests by employing instrumental variables that are standard in the financial economics literature. The paper finds that the share of the number of firms listed in the domestic market and the share of internet users in the total population of the host country has a significant impact on equity home bias. Trade linkages are found to have a mixed impact on equity home bias. The paper also finds that the country's market share of the world market capitalisation and transaction costs do not impact Australia's equity home bias. Investors are found to exhibit low diversification motives. [source]

Keeping Up with the Joneses and the Home Bias

EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2004
Beni Lauterbach
F30; G11; G12; G15 Abstract We argue that when individuals care about their consumption relative to that of their neighbours, a home bias emerges, that is investors overweight domestic stocks in their portfolios. Domestic stocks are preferred because they also serve the objective of mimicking the economic fortunes and welfare of the investor's neighbours, countrymen, and social reference group. We also demonstrate that globalization mitigates the home bias, and derive a modified international CAPM. [source]

Home Bias in Leveraged Buyouts,

INTERNATIONAL FINANCE, Issue 3 2009
Peter Cornelius
In this paper, we examine cross-border investments in 2,260 portfolio companies by 102 buyout funds raised between 1995 and 2004. Using proprietary data compiled by AlpInvest Partners, we calculate the aggregate home bias of these funds as well as their home bias at the fund level. We find significant variation across funds. While UK-based funds are on average least home-biased, they show a high degree of intra-European bias. In comparison, US funds are found to be least home-biased in terms of inter-regional acquisitions, with Europe being the most important destination for US buyout capital. Furthermore, we find that buyout funds tend to be less home-biased than portfolio investors and, more specifically, mutual funds. This finding is consistent with the optimal ownership theory of the home bias, which predicts that foreign direct investment , as opposed to portfolio investment , represents the preferred choice of entry in countries where the quality of governance is perceived to be inferior, promoting insider ownership. [source]

Financial Globalization, Governance, and the Evolution of the Home Bias

JOURNAL OF ACCOUNTING RESEARCH, Issue 2 2009
BONG-CHAN KHO
ABSTRACT We merge portfolio theories of home bias with corporate finance theories of insider ownership to create the optimal corporate ownership theory of the home bias. The theory has two components: (1) foreign portfolio investors exhibit a large home bias against countries with poor governance because their investment is limited by high optimal ownership by insiders (the "direct effect" of poor governance) and domestic monitoring shareholders (the "indirect effect") in response to the governance and (2) foreign direct investors from "good governance" countries have a comparative advantage as insider monitors in "poor governance" countries, so that the relative importance of foreign direct investment is negatively related to the quality of governance. Using both country-level data on U.S. investors' foreign investment allocations and Korean firm-level data, we find empirical evidence supporting our optimal corporate ownership theory of the home bias. [source]

Discussion of Financial Globalization, Governance, and the Evolution of Home Bias

JOURNAL OF ACCOUNTING RESEARCH, Issue 2 2009
GREGORY S. MILLER
First page of article [source]

Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2007
VICENTIU M. COVRIG
ABSTRACT We test the assertion that a consequence of voluntarily adopting International Accounting Standards (IAS) is the enhanced ability to attract foreign capital. Using a unique database that reports firm-level holdings of over 25,000 mutual funds from around the world, our multivariate tests find that average foreign mutual fund ownership is significantly higher among IAS adopters. We also find that IAS adopters in poorer information environments and with lower visibility have higher levels of foreign investment, consistent with firms using IAS adoption to provide more information and/or information in a more familiar form to foreign investors. Taken together, our findings are consistent with voluntary IAS adoption reducing home bias among foreign investors and thereby improving capital allocation efficiency. [source]

AN INVESTIGATION OF HOME BIAS IN SUPERANNUATION INVESTMENT CHOICES

Keeping Up with the Joneses and the Home Bias

Capital Market Integration in Euroland: The Role of Banks

GERMAN ECONOMIC REVIEW, Issue 4 2000
Claudia M. Buch
The introduction of the euro marks a milestone in the process of European financial market integration. This paper analyzes the implications of the euro for cross-border banking activities. A portfolio model is used which captures the role of banks as providers of informational and of risk-diversification services. By eliminating exchange rate risks, the euro enhances the incentives of banks to expand within Euroland. Yet, while the currency bias in bank portfolios will be eliminated, the home bias will remain. Implications of market integration for the risk-taking and the monitoring of banks are not clear-cut. [source]

Home Bias in Leveraged Buyouts,

Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization

JOURNAL OF ACCOUNTING RESEARCH, Issue 2 2009
RENÉ M. STULZ
ABSTRACT As barriers to international investment fall and technology improves, the cost advantages for a firm's securities to trade publicly in the country in which that firm is located and for that country to have a market for publicly traded securities distinct from the capital markets of other countries will progressively disappear. Securities laws remain an important determinant of whether and where securities are issued, how they are valued, who owns them, and where they trade. I show that there is a demand from entrepreneurs for mechanisms that allow them to commit to credible disclosure because disclosure helps reduce agency costs. Under some circumstances, mandatory disclosure through securities laws can help satisfy that demand, but only provided investors or the state can act on the information disclosed and the laws cannot be weakened ex post too much through lobbying by corporate insiders. With financial globalization, national disclosure laws can have wide-ranging effects on a country's welfare, on firms and on investor portfolios, including the extent to which share holdings reveal a home bias. In equilibrium, if firms can choose the securities laws they are subject to when they go public, some firms will choose stronger securities laws than those of the country in which they are located and some firms will do the opposite. [source]

Financial Globalization, Governance, and the Evolution of the Home Bias

Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards

Product-country images and preference heterogeneity for Mediterranean food products: A discrete choice framework

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 3 2005
Riccardo Scarpa
Despite the importance of region of origin (ROO) as a quality indicator and EU recognition of territorial specificity in food products, there is still a dearth of work investigating the importance of regional (both national and territorial) identity in consumer perceptions for specific food product categories. Employing nationwide discrete choice data for Italy, we investigate the strength of the ROO attribute across three food product categories. Moreover, in addition to treating taste heterogeneity as conditional on socioeconomic factors, we employ recent advances in discrete-choice modeling to test for unobserved heterogeneity in consumer preferences for domestic and territorial origin of production certification. The results show evidence of home bias in preference across all three food products, while preference heterogeneity is exhibited for table grapes and oil, but not for oranges. The analysis shows that unobserved heterogeneity, as represented by mixed logit models, appears to explain more of the observed choice variation than heterogeneity associated to socioeconomic characteristics. [JEL classification: Q120,Q130, Q180]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 329,349, 2005. [source]

Motives to restructure industries: Finnish evidence of cross-border and domestic mergers and acquisitions

PAPERS IN REGIONAL SCIENCE, Issue 1 2006
Eero Lehto
Mergers and acquisitions; home bias; monitoring Abstract., We estimate a multilogit model for the probabilities that a firm will acquire or become a target in different M&A categories, which are defined according to the location of an acquiring firm with respect to a target. We find that certain firm characteristics of an acquiring firm regarded as indicative of having a high capability of monitoring a target , or internalising the potential synergies of M&A , increase the probability of distant M&As at the expense of close M&As. Factors which ease the monitoring of the target firm's value increase the probability that such a firm becomes a target located far from an acquiring firm. [source]

Is the Corporate Loan Market Globally Integrated?

THE JOURNAL OF FINANCE, Issue 6 2007
A Pricing Puzzle
ABSTRACT We offer evidence that interest rate spreads on syndicated loans to corporate borrowers are economically significantly smaller in Europe than in the United States, other things equal. Differences in borrower, loan, and lender characteristics do not appear to explain this phenomenon. Borrowers overwhelmingly issue in their natural home market and bank portfolios display home bias. This may explain why pricing discrepancies are not competed away, though their causes remain a puzzle. Thus, important determinants of loan origination market outcomes remain to be identified, home bias appears to be material for pricing, and corporate financing costs differ across Europe and the United States. [source]

Is Japan Facing a Public Debt Crisis?

ASIAN POLITICS AND POLICY, Issue 4 2010
Debt Financing, the Development of the JGB Market
This article explores the idiosyncratic institutional features of public debt financing in Japan that have enabled the government to finance increasing public debt at low costs. It examines the three key aspects that contributed to the Japanese government bond (JGB) market development: (1) the surplus financial balance of the household sector; (2) the strong tradition of public financing; and (3) home bias, that is, little dependence on external financing. It argues that Japan's financial institutions' capacity to absorb JGBs is reaching the limit and that the Japanese government needs to take bolder measures to reverse the flow of financial intermediation, from the public to the private sector. It also suggests that restoring people's trust in the government's competence and leadership is an essential element for successful fiscal consolidation. [source]