U.S. Investors' Emerging Market Equity Portfolios: A Security-level Analysis, Issues 2003-2238
International Monetary Fund, Dec 1, 2003 - Stock ownership - 31 pages
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.
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Asian firm barriers to international benchmark surveys billion capital controls coefficient cost of capital country dummies cross-listed firms cross-listed on U.S. cross-listed stocks cross-listing effect Current Ratio dividend yield DPSW emerging Asia emerging market equities emerging market firms evidence Falkenstein 1996 financial health firm characteristics firm-level firms that cross-listed foreign investment foreign securities foreign stocks full sample held by insiders held by U.S. high beta home bias increase in U.S. information asymmetries information environment institutional investors international CAPM weights international risk sharing investable weight investor protection regulations Latin America Latin American stocks Level I ADRs Leverage liquidity Malaysia market capitalization non-cross-listed percent percentage points quintile relationship reported residual variance Return on Assets significant Stulz subject to U.S. Table transaction costs turnover rates U.S. exchanges U.S. investor protection U.S. investors hold U.S. markets U.S. ownership U.S. portfolios U.S. positions Warnock weights in U.S. world market portfolio Worldscope zero U.S. holdings