Stress Testing the Equity Home Bias: A Turnover Analysis of Eurozone Markets

39 Pages Posted: 9 Jul 2019

See all articles by Manuela Geranio

Manuela Geranio

Bocconi University - Department of Finance

Valter Lazzari

LIUC Università Cattaneo; SDA Bocconi School of Management

Date Written: July 2019

Abstract

Shifts in equity turnover happen on and around holidays because rationally bounded investors become distracted. Their pattern reveals a persistent equity home bias even in the Eurozone, a stress test case for the survival of this bias given the high level of economic and financial development and integration in this area. The bias is greater for small caps because investors are reluctant to hold this class of foreign asset. Our study corroborates calendar anomalies in trading volumes, but refutes the hypothesis regarding turnover sensitivity to stock returns common in the empirical and theoretical literature based on investor heterogeneity and short sale constraints. Our results reveal vanishing cost asymmetries in taking long rather than short positions.

Keywords: equity markets; trading volumes; holiday effect; Eurozone exchanges

JEL Classification: G12, G41, F36

Suggested Citation

Geranio, Manuela and Lazzari, Valter, Stress Testing the Equity Home Bias: A Turnover Analysis of Eurozone Markets (July 2019). BAFFI CAREFIN Centre Research Paper No. 2019-114. Available at SSRN: https://ssrn.com/abstract=3416532 or http://dx.doi.org/10.2139/ssrn.3416532

Manuela Geranio (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Valter Lazzari

LIUC Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy
+39-0331572205 (Phone)

SDA Bocconi School of Management ( email )

Via Bocconi 8
Milan, Milan 20136
Italy
+39-3334993014 (Phone)

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