Suboptimal international equity portfolio diversification and stock market development
Frank O. Kwabi (),
Chandra Thapa (),
Krishna Paudyal () and
Suman Neupane ()
Additional contact information
Frank O. Kwabi: De Montfort University
Chandra Thapa: University of Strathclyde
Review of Quantitative Finance and Accounting, 2020, vol. 54, issue 1, No 13, 389-412
Abstract This paper examines whether the widely reported phenomena of home and foreign biases (i.e. suboptimal international equity portfolio diversification) hold any ramifications for the development of stock markets. The results, analysed using macro- and micro-level data, support the view that stock markets that are characterised by a higher degree of home bias are associated with lower levels of development. On the other hand, markets where foreign investors show a higher degree of allocation preference, relative to the prescribed benchmark (foreign bias), are found to be more developed. The results, which are robust to the use of shock based identification strategy, indicate that policy measures that promote optimal international equity portfolio diversification could be crucial in developing the depth and breadth of domestic stock markets.
Keywords: International equity portfolio diversification; Stock market development; Equity home bias; Equity foreign bias; Shock based identification strategy (search for similar items in EconPapers)
JEL-codes: F3 G11 G14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s11156-019-00793-9 Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:54:y:2020:i:1:d:10.1007_s11156-019-00793-9
Ordering information: This journal article can be ordered from
Access Statistics for this article
Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee
More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().