Beyond Home Bias: Portfolio Holdings and Information Heterogeneity
Filippo De Marco,
Marco Macchiavelli and
No 942, Boston College Working Papers in Economics from Boston College Department of Economics
We investigate whether information frictions are important determinants of banks’ sovereign debt portfolios. Going beyond the classic home versus foreign distinction in holdings, we study the heterogeneity within the foreign sovereign portfolio. First, we propose a modified version of the Van Nieuwerburgh and Veldkamp (2009) model with a two-tiered information structure that links portfolio holdings and information acquisition. Second, we find strong support for the key predictions of the model in the data: if a bank makes a forecast for a given country, it is more likely to hold debt of that country. Moreover, more optimistic and more precise forecasts predict larger portfolio holdings.
Keywords: Home bias; Information frictions; Portfolio choice; Banks (search for similar items in EconPapers)
JEL-codes: G11 G21 F30 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp942.pdf main text (application/pdf)
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:boc:bocoec:942
Access Statistics for this paper
More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().