Foreign exposure through domestic equities |
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| Authors: | Fang Cai Francis E Warnock |
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| Institution: | 1. Board of Governors of the Federal Reserve System, Washington, DC 20551, United States;2. Darden Business School, University of Virginia, Charlottesville, VA 22906-6500, United States;3. Institute for International Integration Studies, Trinity College, Dublin 2, Ireland;4. National Bureau of Economic Research, Cambridge, MA 02138, United States;1. Accounting and Finance Division, Stirling Management School, University of Stirling, United Kingdom;2. School of Management, University of St Andrews, United Kingdom;1. Cukurova University, Vocational School of Imamoglu, Department of Computer Technologies, 01700 Adana, Turkey;2. Gaziantep University, Arts-Sciences Faculty, Physics Engineering Department, 02700 Gaziantep, Turkey;3. Cukurova University, Arts-Sciences Faculty, Physics Department, 01330 Adana, Turkey |
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| Abstract: | We show that US investors obtain substantial foreign exposure through their holdings of domestic equities. Domestic multinationals, in particular, provide significant foreign exposure. We also find that, although the average US investor is less tilted toward domestic multinationals, institutional investors do overweight domestic firms that are more internationally oriented. ‘Indirect’ foreign holdings through domestic multinationals are shown to be substantial; combining them with reported data on international positions almost doubles US investors’ total ‘foreign’ holdings. Our findings indicate that the home bias is not as severe as assessments based on reported international investment statistics suggest. |
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