Asymmetric information and the lack of international portfolio diversifcation
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Asymmetric information and the lack of international portfolio diversifcation by Juan Carlos Hatchondo

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Published by Federal Reserve Bank of Richmond in [Richmond, Va.] .
Written in English


Book details:

Edition Notes

StatementJuan Carlos Hatchondo.
SeriesWorking paper ;, no. 05-7, Working paper (Federal Reserve Bank of Richmond : Online) ;, no. 05-7.
ContributionsFederal Reserve Bank of Richmond.
Classifications
LC ClassificationsHB1
The Physical Object
FormatElectronic resource
ID Numbers
Open LibraryOL3479245M
LC Control Number2005620385

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There is pervasive evidence that individuals invest primarily in domestic assets and thus hold poorly diversified portfolios. Empirical studies suggest that informational asymmetries may play a role in explaining the bias towards domestic assets. In contrast, theoretical studies based on asymmetric information fail to produce significant quantitative : Juan Carlos Hatchondo. INTERNATIONAL ECONOMIC REVIEW Vol. 49, No. 4, November ASYMMETRIC INFORMATION AND THE LACK OF PORTFOLIO DIVERSIFICATION* BY JUAN CARLOS HATCHONDO1 Federal Reserve Bank of Richmond, U.S.A. There is pervasive evidence that individuals invest primarily in local stocks and thus hold poorly diversified portfolios. The present .   asymmetric information and the lack of portfolio diversification * This is known as the home equity bias, and it was first documented in the international finance literature. French and Poterba (), Cooper and Kaplanis (), and Tesar and Werner () were the first to show that agents in developed countries allocate a low fraction of their equity portfolio in stocks of foreign companies.   How to Cite. Carlos Hatchondo, J. (), ASYMMETRIC INFORMATION AND THE LACK OF PORTFOLIO DIVERSIFICATION. International Economic Review, – doi:

Asymmetric information and the lack of portfolio diversification Article in International Economic Review 49(4) November with 46 Reads How we measure 'reads'. "Asymmetric Information And The Lack Of Portfolio Diversification," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages , November. Asymmetric information and the lack of international portfolio diversification. By Juan Carlos Hatchondo. Abstract. There is pervasive evidence that individuals invest primarily in domestic assets and thus hold poorly diversified portfolios. Empirical studies suggest that informational asymmetries may play a role in explaining the bias towards. II. THE EFFECT ON PORTFOLIO CHOICE OF ASYMMETRIC INFORMATION AND TRANSACTION COSTS. The gain from international diversification were documented by Grubel (), Levy and Sarnat (), Solnik (a), Gerard and De Santis () and others. Tesar and Werner () find a strong evidence of a home bias in national investment portfolios.

What is International Portfolio Diversification? Definition of International Portfolio Diversification: By making an investment in a variety of assets from foreign stock markets, investors can reduce portfolio risk as much as possible by holding international assets that are negatively correlated. In simple one-good international macro models, the presence of non-diversifiable labor income risk means that country portfoliosshould be heavily biased toward foreign assets. The fact that theopposite pattern of diversification is observed empirically constitutes the international diversification puzzle. We embed aportfolio choice decision in a frictionless two-country, two-good version of. There is pervasive evidence that individuals invest primarily in domestic assets and thus hold poorly diversified portfolios. Empirical studies suggest that informational asymmetries may play a role in explaining the bias towards domestic assets. In contrast, theoretical studies based on asymmetric information fail to produce significant quantitative effects. o Asymmetric information o Political risk o Lack of transparency international portfolio diversification shifts opportunity set up and to the left, minimizing risk for the same level of return opportunity set, capital market line, optimal domestic/international portfolio.