What Determines the Domestic Bias and Foreign Bias? Evidence from Mutual Fund Equity Allocations Worldwide

Chan, Kalok; Covrig, Vicentiu; Ng, Lilian

doi:10.1111/j.1540-6261.2005.768_1.x

Cited by 765 publications

(603 citation statements)

References 49 publications

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“…To capture the practical barriers, the S&P Emerging Markets database defines small and illiquid stocks as noninvestible. 7 It then creates a variable called the "degree open factor" or "investible weight," which ranges from 6 Some other studies also show that governance environments and monitoring ability play an important role in determining cross-border acquisitions and fixed investments (Rossi and Volpin (2004), Kelley and Woidtke (2006)), as well as international investment allocation (Dahlquist, Pinkowitz, Stulz, and Williamson (2003), Chan, Covrig, and Ng (2005), and Leuz, Lins, and Warnock (2009)). 7 These criteria vary at the discretion of S&P's Index Committee.…”

Section: A Descriptions Of the Sample Of Emerging Market Firmsmentioning

confidence: 99%

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

Li¹,

Nguyễn²,

Pham³

et al. 2011

J. Financ. Quant. Anal.

147

110

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This study constructs a firm-level measure of large foreign ownership (LFO) and investigates its impact on stock return volatility in 31 emerging markets. We find a negative relationship between LFO and volatility, even after controlling for potential endogeneity and the impact of major domestic shareholders. This suggests a stabilizing role of LFO in emerging markets, which is consistent with previous suggestions in the literature on the strong commitments and potential monitoring role of large foreign shareholders. Overall, our study highlights the importance of recognizing the heterogeneity among foreign investors and the benefits of large foreign shareholders to emerging stock markets.

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Section: A Descriptions Of the Sample Of Emerging Market Firmsmentioning

confidence: 99%

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

Li¹,

Nguyễn²,

Pham³

et al. 2011

J. Financ. Quant. Anal.

147

110

View full text Add to dashboard Cite

show abstract

“…We also include a Country Governance variable, defined as the average of the six institutional variables from Kaufmann, Kraay, and Mastruzzi (2006). Following Chan, Covrig, and Ng (2005), we also control for other economic development characteristics of destination countries using stock market capitalization over GDP, stock market turnover, and log of GDP per capita. These data are collected from World Development Reports.…”

Section: Datamentioning

confidence: 99%

Information Immobility and Foreign Portfolio Investment

Andrade

Chhaochharia

2010

Rev. Financ. Stud.

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We examine how residents of the United States allocate their stock portfolios internationally. We find that a large U. FDI establishes marginal differences in the endowments of information about different countries, which later translate into differences in stock portfolio holdings. We control for cross-country differences in capital controls, proximity along different dimensions, corporate governance, and economic and capital market development. Our results also hold for the G6 countries collectively. (JEL F21, F36, G11) How do investors allocate their stock portfolio internationally? The capital asset pricing model (CAPM) under purchasing power parity predicts that all investors hold the World Market Portfolio regardless of their nationality (Grauer, Litzenberger, and Stehle 1976). This prediction, however, is clearly at odds with the data (Karolyi and Stulz 2003), indicating that investors take into account factors other than the benefits of international diversification. Economists need alternative theories to describe how investors allocate their portfolios internationally.An important family of models asserts that cross-country differences in stock portfolio allocations arise because investors in different countries are endowed with different information sets (Gherig 1993;Brennan and Cao 1997;Kang and Stulz 1997). A long-standing conceptual difficulty with this argument is that information asymmetry would not be sustainable for long periWe are grateful to Geert Bekaert (the Editor) and two anonymous reviewers for excellent suggestions. For helpful discussions, we thank

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“…The main advantage of the TFS is provided by the details of assets down to the equity level. Hau and Rey (2008) study international fund investment using TFS during 1997-2002, and Chan et al (2005 for the years 1999 and 2000. The second database is the State Street Bank and Trust (SSB), which has the benefit of high-frequency daily information and is studied by Froot et al (2001).…”

Section: Data and Characteristics Of International Fund Investmentmentioning

confidence: 99%

International fund investment and local market returns

Jinjarak

Wongswan

Zheng

2011

Journal of Banking & Finance

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a b s t r a c tInternational fund investment in bonds and equities is characterized by a positive association between current net inflows and contemporaneous and past market returns: positive-feedback trading, while being possibly profitable for international fund investors, could be destabilizing for the underlying markets. Allowing for interactions between equity investment and bond investment, our panel vector autoregression shows that past equity returns contain useful information in forecasting equity and bond flows and that bond flows impact future equity returns positively.

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What Determines the Domestic Bias and Foreign Bias? Evidence from Mutual Fund Equity Allocations Worldwide

Cited by 765 publications

References 49 publications

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

Information Immobility and Foreign Portfolio Investment

International fund investment and local market returns

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