Sub-optimal international portfolio allocations and cost of capital

dc.cclicenceCC-BY-NCen
dc.contributor.authorKwabi, Franken
dc.contributor.authorFaff, Roberten
dc.contributor.authorMarshall, Andrewen
dc.contributor.authorThapa, Chandraen
dc.date.acceptance2016-04-09en
dc.date.accessioned2017-03-17T13:32:10Z
dc.date.available2017-03-17T13:32:10Z
dc.date.issued2016-04-09
dc.descriptionThe 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.en
dc.description.abstractFinance theory suggests that the optimal international equity portfolio investment by home and foreign investors reduces cost of capital through international risk sharing and capital market integration. However, the empirical evidence is inconsistent with theory as a number of studies show investors exhibit cross-country biases in their international portfolio investments, known as home and foreign biases. In this study we investigate the implications of home and foreign biases on cost of capital. Using data from 44 countries over a period of 2001-2014, we provide strong evidence that countries which experience higher home bias are associated with a higher cost of capital. Similarly, we also find that countries which are more favoured by foreign investors, relative to the theoretical predictions, are associated with a lower cost of capital.en
dc.exception.reasonoutput produced at prv, inst. on University of Strathclyde repositoryen
dc.exception.ref2021codes254aen
dc.funderN/Aen
dc.identifier.citationKwabi et al. (2016) Sub-optimal international portfolio allocations and cost of capital. Journal of Multinational Financial Management, 35, pp. 41-58en
dc.identifier.doihttps://doi.org/10.1016/j.mulfin.2016.04.001
dc.identifier.urihttp://hdl.handle.net/2086/13719
dc.language.isoenen
dc.peerreviewedYesen
dc.projectidN/Aen
dc.publisherElsevieren
dc.researchgroupFiBReen
dc.researchinstituteFinance and Banking Research Group (FiBRe)en
dc.subjectMarket integrationen
dc.subjectInternational Capital Asset Pricing Modelen
dc.subjectEquity home biasen
dc.subjectEquity foreign biasen
dc.subjectCost of capitalen
dc.titleSub-optimal international portfolio allocations and cost of capitalen
dc.typeArticleen

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