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2021_Wallmeier_Home
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Home Bias and Expected Returns: A Structural Approach

BP2-STS

  • 2021
Home bias
Asset pricing
International diversification
Implied expected return
Core-satellite approach
Home preferences
Equilibrium model
English We study the effect of the home bias on international asset pricing by extending the core-satellite approach of active asset allocation to an equilibrium analysis. In this framework, investors combine a common core portfolio with an active investment in their home asset. In equilibrium, the core portfolio will deviate from the global market portfolio in characteristic ways, which we exploit to propose a new test of the home premium in expected returns. Unlike previous findings, our evidence suggests that the premium is almost negligible even though the home bias is substantial. This result is mainly driven by the generally high correlation of index returns and the distribution of the relative level of the home bias across countries.
Faculty
Faculté des sciences économiques et sociales et du management
Department
Département des sciences du Management
Language
  • English
Classification
Economics
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SSRN

License
License undefined
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/320358
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