Capital Flow, Nontradable Consumption and Home Bias

Mao-wei Hung () and Hsiao-yuan Yu ()
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Mao-wei Hung: College of Management, National Taiwan University
Hsiao-yuan Yu: College of Management, National Taiwan University

Economics Bulletin, 2005, vol. 6, issue 9, 1-15

Abstract: This paper analyzes the relationship between net capital flow and home bias puzzle. The model suggests that both capital inflow and potential preference in home assets lead agents to allocate more in domestic and thus s home bias phenomenon. Besides, the more nontradable consumption, the fewer portfolios would be allocated in home assets. It is controversial with nontradable goods theorem.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 2005-06-20
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