U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis

Hali Edison () and Francis Warnock

The Review of Economics and Statistics, 2004, vol. 86, issue 3, 691-704

Abstract: We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document that at a point in time U.S. portfolios are tilted towards firms that are large, have fewer restrictions on foreign ownership, or are cross-listed on a U.S. exchange. The size of the cross-listing effect is striking. In contrast to the well-documented under-weighting of foreign stocks, emerging market equities that are cross-listed on a U.S. exchange are incorporated into U.S. portfolios at full international CAPM weights. Our results suggest that information asymmetries play an important role in equity home bias and that the benefits of international risk sharing are limited to select firms. © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2004
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Working Paper: U.S. investors' emerging market equity portfolios: a security-level analysis (2003)
Working Paper: U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis (2003)
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