DMCA
Information Immobility and the Home Bias Puzzle (2009)
Cached
Download Links
| Venue: | Journal of Finance |
| Citations: | 60 - 3 self |
BibTeX
@ARTICLE{Nieuwerburgh09informationimmobility,
author = {Stijn Van Nieuwerburgh and Laura Veldkamp},
title = {Information Immobility and the Home Bias Puzzle},
journal = {Journal of Finance},
year = {2009},
pages = {1187--1215}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
Many papers have argued that home bias arises because home investors can predict payoffs of their home assets more accurately than foreigners can. But why does this information advantage exist in a world where investors can learn foreign information? We model investors who are endowed with a small home information advantage. They can choose what information to learn before they invest in many risky assets. Surprisingly, even when home investors can learn what foreigners know, they choose not to. The reason is that investors profit more from knowing information that others do not know. Allowing investors to learn amplifies their initial information asymmetry. The model explains local and industry bias as well as observed patterns of foreign investments, portfolio out-performance and asset prices. Finally, we outline new avenues for empirical research.
Keyphrases
home bias puzzle information immobility home investor industry bias home bias arises portfolio out-performance small home information advantage information advantage exist initial information asymmetry empirical research foreign information new avenue home asset asset price many paper foreign investment many risky asset
