Equity home bias—A global perspective from the shrunk frontier
Date
2018
Authors
Mukherjee, Raja
Paul, Satya
Shankar, Sriram
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
Equity home bias research explicates the need for correct characterisation of benchmark (optimum) foreign equity investment weights required for the estimation of equity home bias. This paper improves upon the traditional mean–variance optimisation framework by utilising the Bayes–Stein shrinkage technique to obtain optimal equity weights and home bias estimates for 39 countries for the period, 2000–2009. A regression model estimated with system GMM identifies financial integration, trade openness (exposure), stock market capitalisation, idiosyncratic risk and Global Financial Crisis (GFC) as the significant determinants of equity home bias. Unlike earlier studies, the relationship between home bias and financial integration is found to be U-shaped.
Description
Keywords
Equity home bias, Equity investment, Optimal investment weights, Bayes–Stein shrinkage, GMM estimation
Citation
Collections
Source
Economic Analysis and Policy
Type
Journal article
Book Title
Entity type
Access Statement
Open Access
License Rights
Restricted until
Downloads
File
Description
Author/s Accepted Manuscript (AAM) / Post-Print