Biases in International Portfolio Allocation and Investor Protection Standards

Date

2017-09-09

Advisors

Journal Title

Journal ISSN

ISSN

1057-5219

Volume Title

Publisher

Elsevier

Type

Article

Peer reviewed

Yes

Abstract

Economic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15 years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.

Keywords

financial globalization, investor protection standards, equity home bias, Equity foreign bias

Citation

Kwabi, F., Thapa, C., Paudyal, K. and Adegbite, E. (2017) Biases in International Portfolio Allocation and Investor Protection Standards. International Review of Financial Analysis, 53, pp. 66-79

Rights

Research Institute

Finance and Banking Research Group (FiBRe)