Does the difference in valuation between domestic and foreign investors help explain their distinct holdings of domestic stocks?

Political conflict and foreign portfolio investment: Evidence from North Korean attacks

“…Kang et al (2010), for example, document that the median foreign ownership for the stocks listed on the Korea Stock Exchange is less than 1% while the mean is 11.5% for the 2000-2004 period. As such, an equal treatment of all Korean stocks cannot provide an accurate assessment of the behavior of international investors.…”

Does Foreign Investment Affect U.S. Office Real Estate Prices?

“…In terms of theory, the international capital asset pricing model (ICAPM) predicts that globally diversified investors should have lower risk premiums than nondiversified investors. Foreigners who invest in multiple countries and whose performances are likely to be assessed in a global context will evaluate domestic stocks via a global benchmark, while domestic investors will use a local benchmark to evaluate domestic stocks (Kang, Lee, and Park [2010]). The expectation is that a global investor base generates a lower cost of capital and hence a greater equity value (see Stulz [1999]).…”

Cultural influences on home bias and international diversification by institutional investors

“…Leuz et al (2008) report that quality of corporate governance practices at the firm level influences foreign shareholdings by US investors. Kang et al (2010) suggest that home bias and over/underweighting of international securities may arise from valuation differences between domestic and foreign investors. Ferreira and Matos (2008) find that institutions prefer large, well-governed firms with high levels of stock-trading liquidity.…”