Why Is There a Home Bias? An Analysis of Foreign Portfolio Equity Ownership in Japan
Jun-Koo Kang and
René Stulz
No 5166, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper uses data on foreign stock ownership in Japan from 1975 to 1991 to examine the determinants of the home bias in portfolio holdings. Existing models of international portfolio choice predicting that foreign investors hold national market portfolios or portfolios tilted towards high expected return stocks are inconsistent with the evidence provided in this paper. We document that foreign investors overweight shares of firms in manufacturing industries, large firms, firms with good accounting performance, firms with low unsystematic risk, and firms with low leverage. Controlling for size, there is evidence that small firms that export more have greater foreign ownership. Foreign investors do not perform significantly worse than if they held the Japanese market portfolio, however. After controlling for firm size, there is no evidence that foreign ownership is related to expected returns of shares. We show that a model with size-based informational asymmetries and deadweight costs can yield asset allocations consistent with our evidence.
Date: 1995-07
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)
Published as Journal of Financial Economics, Vol. 46, no. 1 (October 1997): 3-28.
Downloads: (external link)
http://www.nber.org/papers/w5166.pdf (application/pdf)
Related works:
Journal Article: Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan (1997) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5166
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5166
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().