Information Immobility and the Home Bias Puzzle

Stijn Van Nieuwerburgh and Laura Veldkamp

Journal of Finance, 2009, vol. 64, issue 3, 1187-1215

Abstract: Many argue that home bias arises because home investors can predict home asset payoffs more accurately than foreigners can. But why does global information access not eliminate this asymmetry? We model investors, endowed with a small home information advantage, who choose what information to learn before they invest. Surprisingly, even when home investors can learn what foreigners know, they choose not to: Investors profit more from knowing information others do not know. Learning amplifies information asymmetry. The model matches patterns of local and industry bias, foreign investments, portfolio outperformance, and asset prices. Finally, we propose new avenues for empirical research.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (448)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2009.01462.x

Related works:
Working Paper: Information Immobility and the Home Bias Puzzle (2007)
Working Paper: Information Immobility and the Home Bias Puzzle (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:64:y:2009:i:3:p:1187-1215

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().