U.S. Investors' Emerging Market Equity Portfolios : A Security-Level Analysis

Author/Editor:

Francis E. Warnock ; Hali J Edison

Publication Date:

December 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document, as expected, that at a point in time U.S. portfolios are tilted towards firms that are large, have fewer restrictions on foreign ownership, or are cross-listed on a U.S. exchange. The size of the cross-listing effect is striking. In contrast to the well-documented underweighting of foreign stocks, emerging market equities that are cross-listed on a U.S. exchange are incorporated into U.S. portfolios at full international capital asset pricing model (CAPM) weights. Our results suggest that information asymmetries play an important role in equity home bias and that the benefits of international risk sharing are limited to select firms.

Series:

Working Paper No. 03/238

Subject:

English

Publication Date:

December 1, 2003

ISBN/ISSN:

9781451875768/1018-5941

Stock No:

WPIEA2382003

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

32

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