International Diversification at Home and Abroad

48 Pages Posted: 8 Jun 2016

See all articles by Fang Cai

Fang Cai

Federal Reserve Board

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: 2005

Abstract

We analyze foreigners' and domestic institutional investors' positions in U.S. equities. Controlling for many factors, we uncover a common preference for large firms and firms that are diversified internationally. The domestic preference for internationally diversified firms implies that investors might obtain substantial international diversification by investing at home. Using an international factor model, we show that exposure to foreign equity markets is indeed greater for domestic firms that are more diversified internationally, suggesting that at least some of the home-grown foreign

Keywords: home bias, international portfolio allocation, foreign exposure

JEL Classification: G3, G11, G15

Suggested Citation

Cai, Fang and Warnock, Francis E., International Diversification at Home and Abroad (2005). Bundesbank Series 1 Discussion Paper No. 2005,06, Available at SSRN: https://ssrn.com/abstract=2785092

Fang Cai (Contact Author)

Federal Reserve Board ( email )

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Francis E. Warnock

University of Virginia - Darden Business School ( email )

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United States
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HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

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