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The Spatial Impact of Cultural Distances on Home Bias across Asian Emerging Markets

Heeho Kim ()
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Heeho Kim: Kyungpook National University

Atlantic Economic Journal, 2017, vol. 45, issue 1, 81-101

Abstract: Abstract Using a set of individual country-pair data on cross-border equity transactions between seven Asian countries (China, Japan, Korea, Malaysia, Singapore, Thailand, and Australia) in the years 2002–2012, we document that investors are more likely to show similar extent of home bias across Asian emerging markets than the developed markets. The spatial panel regression analysis indicates that the spillover effects of cultural and economic distances are more significant than the effect of geometric distance. Investors’ familiarity about Asian countries seems to influence the similar extent of home bias across Asian financial markets, while not so in the developed countries. In particular, the spatial spillover influences of risk associated with cultural and economic distances are more prominent among the Asian financial markets than the developed countries. Our home bias model can be spatially applied to not only different regions but also to different types of investors in international portfolio flows.

Keywords: Home bias; Culture spatial dependence; Asian emerging markets; Portfolio risk; F1; F3; G10 (search for similar items in EconPapers)
Date: 2017
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