Endogenous asymmetric information and international equity home bias: The effects of portfolio size and information costs

Authors

John M. Barron, Purdue University
Jinlan Ni, University of Nebraska at OmahaFollow

Author ORCID Identifier

Jinlan Ni

Document Type

Article

Publication Date

6-2008

Publication Title

Journal of International Money and Finance

Volume

27

Issue

4

First Page

617

Last Page

635

Abstract

Equity home bias is one of the major puzzles in international finance. This paper investigates the impact of asymmetric information on equity home bias in a rational expectation model where portfolio managers differ in their levels of initial portfolio size and information acquisition is endogenous. The model characterizes the information acquisition and investment decisions made by each portfolio manager, and the resulting equilibrium. We find that portfolio managers with larger portfolio size acquire information about the foreign asset; this is consistent with new evidence linking the degree of home bias across portfolio managers to portfolio size.

Comments

https://doi.org/10.1016/j.jimonfin.2008.02.003

Recommended Citation

Barron, John M. and Ni, Jinlan, "Endogenous asymmetric information and international equity home bias: The effects of portfolio size and information costs" (2008). Economics Faculty Publications. 53.
https://digitalcommons.unomaha.edu/econrealestatefacpub/53

Creative Commons License

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.