“…Ninety-one percent of US stock 3 Ownership defined this way, when limited to one source country and one time period, is observationally equivalent to more exact home bias measures. See Ammer et al (2011) for a detailed discussion. 4 A detailed description of the data collection methodology, as well as publicly available data from the 2000 survey, is in Treasury Department et al (2002), available at www.treas.gov/tic/fpis.html.…”
Section: The Underlying Holdings Datamentioning
confidence: 99%
“…17 Reported US holdings of foreign equities-$2074 billion or 12 percent of the US equity portfoliomust also be adjusted, because some of those holdings represent claims on cash flows that originate from the US operations of foreign MNCs. To estimate the amount of that adjustment, we turn to the security-level dataset of Ammer et al (2011), which indicates that US holdings of foreign equities weighted by foreign operations anywhere (not just in the United States) totalled about $360 billion in 1997, or 35 percent of overall foreign holdings. Assuming that half those operations were in the United States-a reasonable estimate given US importance in world trade-suggests that in 1997 US holdings of 'foreign' equities that were related to operations in the United States totalled $180 billion.…”
“…Ninety-one percent of US stock 3 Ownership defined this way, when limited to one source country and one time period, is observationally equivalent to more exact home bias measures. See Ammer et al (2011) for a detailed discussion. 4 A detailed description of the data collection methodology, as well as publicly available data from the 2000 survey, is in Treasury Department et al (2002), available at www.treas.gov/tic/fpis.html.…”
Section: The Underlying Holdings Datamentioning
confidence: 99%
“…17 Reported US holdings of foreign equities-$2074 billion or 12 percent of the US equity portfoliomust also be adjusted, because some of those holdings represent claims on cash flows that originate from the US operations of foreign MNCs. To estimate the amount of that adjustment, we turn to the security-level dataset of Ammer et al (2011), which indicates that US holdings of foreign equities weighted by foreign operations anywhere (not just in the United States) totalled about $360 billion in 1997, or 35 percent of overall foreign holdings. Assuming that half those operations were in the United States-a reasonable estimate given US importance in world trade-suggests that in 1997 US holdings of 'foreign' equities that were related to operations in the United States totalled $180 billion.…”
“…We first consider the characteristics of the underlying firms in fund portfolios. Prior studies show that U.S. investors have greater holdings in firms cross-listed on U.S. stock exchanges than those in other foreign firms (Ammer, Holland, Smith, & Warnock, 2012). We use the foreign firms’ cross-listing on U.S. stock exchanges to proxy for the lower information acquisition and processing costs for U.S. investors because U.S. investors have more chances to directly communicate with cross-listed firms’ managers and to attend these firms’ public events (e.g., Baker, Nofsinger, & Weaver, 2002), which helps reduce the uncertainty about financial reports at a lower cost.…”
Section: Literature Review and Hypotheses Developmentmentioning
Closed-end country funds are interesting in that they have two sets of prices for the same underlying assets-the net asset value (NAV) of the fund holdings as measured using the underlying firms' stock prices in their home markets and the fund price at which the fund trades on a U.S. stock exchange. Utilizing the theoretical framework of information asymmetry in two separate markets for an identical asset, we find that the difference between the fund's NAV and its trading price (i.e., the fund discount) is positively associated with the earnings opacity of the underlying companies. Such a positive association is consistent with the notion that U.S. investors face higher information acquisition and processing costs when compared with local investors, and therefore earnings opacity exacerbates the information disadvantage of U.S. investors, leading to a larger fund discount. We further show that the positive relation varies predictably with U.S. investors' information acquisition and processing costs and with the extent to which host stock markets are segmented from the U.S. market. Specifically, we find that the positive relation between earnings opacity and fund discounts is weaker for those funds with more U.S. cross-listings in fund holdings, with underlying companies following financial reporting standards similar to U.S. standards, and with less segmented local markets.
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