Publication Type:

Journal Article

Source:

Economic Analysis and Policy, Volume 57 (2017)

URL:

https://www.researchgate.net/publication/320994527_Equity_home_bias_-A_global_perspective_from_the_shrunk_frontier

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.

Cite this Research Publication

R. Mukherjee, Dr. Satya Paul, and Shankar, S., “Equity home bias –A global perspective from the shrunk frontier”, Economic Analysis and Policy, vol. 57, 2017.

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