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Endogenous Acquisition of Information and the Equity Home Bias

Författare:
Redaktör:
  • Francesco Caselli
  • Frank Cowell
  • Peter Norman Sørensen
  • Alex Michaelides
Publiceringsår: 2009
Språk: Engelska
Sidor: 741-759
Publikation/Tidskrift/Serie: Economica
Volym: 76
Nummer: 304
Dokumenttyp: Artikel
Förlag: Blackwell Publishing

Sammanfattning

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.

Disputation

Nyckelord

  • Business and Economics
  • equity home bias
  • information acquisition
  • information costs

Övriga

Published
Yes
  • ISSN: 1468-0335

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