Biases in International Portfolio Allocation and Investor Protection Standards

International Review of Financial Analysis, Vol.53, pp.66-79, 2017

44 Pages Posted: 23 Jan 2020

See all articles by Frank Kwabi

Frank Kwabi

De Montfort University

Chandra Thapa

University of Strathclyde

Krishna Paudyal

University of Strathclyde

Emmanuel Adegbite

University of Nottingham

Date Written: 2017

Abstract

Economic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15 years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors.

Keywords: financial globalization; investor protection standards; equity home bias; equity foreign bias

JEL Classification: F2, G1, G3

Suggested Citation

Kwabi, Frank and Thapa, Chandra and Paudyal, Krishna and Adegbite, Emmanuel, Biases in International Portfolio Allocation and Investor Protection Standards (2017). International Review of Financial Analysis, Vol.53, pp.66-79, 2017. Available at SSRN: https://ssrn.com/abstract=3507419 or http://dx.doi.org/10.2139/ssrn.3507419

Frank Kwabi

De Montfort University ( email )

The Gateway
Leicester, LE1 9BH
United Kingdom

Chandra Thapa

University of Strathclyde ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

HOME PAGE: http://https://www.strath.ac.uk/staff/thapachandradr/

Krishna Paudyal

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow, G4 0LN
United Kingdom

Emmanuel Adegbite (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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