U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis

Francis Warnock and Hali Edison ()

No 2003/238, IMF Working Papers from International Monetary Fund

Abstract: We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document, as expected, that at a point in time U.S. portfolios are tilted towards firms that are large, have fewer restrictions on foreign ownership, or are cross-listed on a U.S. exchange. The size of the cross-listing effect is striking. In contrast to the well-documented underweighting of foreign stocks, emerging market equities that are cross-listed on a U.S. exchange are incorporated into U.S. portfolios at full international capital asset pricing model (CAPM) weights. Our results suggest that information asymmetries play an important role in equity home bias and that the benefits of international risk sharing are limited to select firms.

Keywords: WP; market portfolio; protection regulation; current ratio; cost of capital; emerging markets; portfolio choice; home bias; international risk sharing; equity portfolio; investors' holding; atomistic investor; investors portfolio; portfolio weight; emerging market equities; Stocks; Emerging and frontier financial markets; Market capitalization; Stock markets; Securities; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 32
Date: 2003-12-01
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Citations: View citations in EconPapers (28)

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Journal Article: U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis (2004)
Working Paper: U.S. investors' emerging market equity portfolios: a security-level analysis (2003)
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