Information Acquisition, International Under-Diversification and Portfolio Performance of Institutional Investors

Midwest Finance Association 2012 Annual Meetings Paper

57 Pages Posted: 16 Sep 2011 Last revised: 5 Sep 2012

See all articles by Nicole Y. Choi

Nicole Y. Choi

University of Wyoming - Department of Economics and Finance

Mark Fedenia

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Hilla Skiba

Colorado State University

Tatyana Sokolyk

Brock University - Department of Finance, Operations & Information Systems

Multiple version iconThere are 2 versions of this paper

Date Written: January 10, 2012

Abstract

We test whether 1) institutional investors with concentrated international holdings outperform internationally diversified investors, and 2) foreign investors with information advantage, measured by cultural and geographic proximity to the target market, outperform other foreign investors. Using the United States as a target market, we document that investors concentrated in US securities do not outperform other investors. This result contradicts the idea that internationally under-diversified portfolios are mean-variance efficient due to the benefits of economies of scale and specialization. However, cultural similarity and geographic proximity to the US enhance investors’ performance in US securities.

Keywords: international institutional investors, information advantage, under-diversification

JEL Classification: G11, G15

Suggested Citation

Choi, Nicole Y. and Fedenia, Mark A. and Skiba, Hilla and Sokolyk, Tatyana, Information Acquisition, International Under-Diversification and Portfolio Performance of Institutional Investors (January 10, 2012). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1928336 or http://dx.doi.org/10.2139/ssrn.1928336

Nicole Y. Choi (Contact Author)

University of Wyoming - Department of Economics and Finance ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States

Mark A. Fedenia

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-4502 (Phone)
608-265-3495 (Fax)

Hilla Skiba

Colorado State University ( email )

Fort Collins, CO 80523
United States
9704912205 (Phone)
9704912205 (Fax)

Tatyana Sokolyk

Brock University - Department of Finance, Operations & Information Systems ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

Register to save articles to
your library

Register

Paper statistics

Downloads
77
Abstract Views
621
rank
173,935
PlumX Metrics