Endogenous Acquisition of Information and the Equity Home Bias
Författare
Summary, in English
This paper investigates the extent to which differences in information costs can explain the equity home bias puzzle. In a model where information costs are higher for the Foreign asset than for the Home asset, we show that---if cost functions are convex and the assets have identical return characteristics---the expected size of the home bias in terms of differences in expected demands is positive and increasing in expected excess returns and risk, but decreasing in risk aversion. However, a calibration to US data suggests that information costs can explain only a small fraction of the observed home bias.
Avdelning/ar
Publiceringsår
2009
Språk
Engelska
Sidor
741-759
Publikation/Tidskrift/Serie
Economica
Volym
76
Issue
304
Länkar
Dokumenttyp
Artikel i tidskrift
Förlag
Wiley-Blackwell
Ämne
- Economics
Nyckelord
- equity home bias
- information acquisition
- information costs
Status
Published
ISBN/ISSN/Övrigt
- ISSN: 1468-0335