Foreign Market Portfolio Concentration and Performance
Financial Management, Forthcoming
38 Pages Posted: 4 Nov 2020
Date Written: February 1, 2019
Using security holdings of 49,857 foreign investors on the Oslo Stock Exchange (OSE), I test whether concentrated investment strategies in international markets result in excess risk-adjusted returns. I find that investors with higher learning capacity increase returns, while investors with lower learning capacity decrease returns from the portfolio concentration. I measure learning capacity as institutional classification, geographical proximity to Norway, and cultural closeness to Norwegian investors (as based on the Hofstede cultural closeness measures). I conclude, consistent with the information advantage theory, that concentrated investment strategies in foreign markets can be optimal (disastrous) for investors with higher (lower) learning capacity.
Keywords: Retail Investors, International Investments, Portfolio Choice
JEL Classification: G11, G14, G15
Suggested Citation: Suggested Citation