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

December 1, 2003

Preview Citation

Format: Chicago

Francis E. Warnock, and Hali J Edison. U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis, (USA: International Monetary Fund, 2003) accessed September 19, 2024

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.

Subject: Emerging and frontier financial markets, Financial institutions, Financial markets, Market capitalization, Securities, Stock markets, Stocks

Keywords: Asia and Pacific, Atomistic investor, Cost of capital, Current ratio, Emerging and frontier financial markets, Emerging market equities, Emerging markets, Equity portfolio, Global, Home bias, International risk sharing, Investors' holding, Investors portfolio, Market capitalization, Market portfolio, Portfolio choice, Portfolio weight, Protection regulation, Securities, Stock markets, Stocks, WP

Publication Details

Pages:

32
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2003/238
Stock No:

WPIEA2382003
ISBN:

9781451875768
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers