International portfolio diversification is better than you think |
| |
Authors: | Nicolas Coeurdacier Stéphane Guibaud |
| |
Institution: | a London Business School and CEPR, Department of Economics, Regent’s Park, London NW1 4SA, UK b London School of Economics, Department of Finance, Houghton Street, London WC2A 2AE, UK |
| |
Abstract: | Using aggregate data on bilateral cross-border equity holdings, we investigate whether investors correctly hedge their over-exposure to domestic risk (the well-known equity home bias) by investing in foreign stock markets that have low correlation with their home stock market. To deal with the endogeneity of stock return correlations, we instrument current correlations with past correlations. Controlling for many determinants of international portfolios, we find that, all else equal, investors do tilt their foreign holdings towards countries, which offer better diversification opportunities. The diversification motive that we uncover is stronger for source countries exhibiting a higher level of home bias. |
| |
Keywords: | G11 G15 |
本文献已被 ScienceDirect 等数据库收录! |
|