Biases in international portfolio allocation and investor protection standards

Frank O. Kwabi, Chandra Thapa, Krishna Paudyal, Emmnuel Adegbite

Research output: Contribution to journalArticle

2 Citations (Scopus)

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.
LanguageEnglish
Pages66-79
Number of pages14
JournalInternational Review of Financial Analysis
Volume53
Early online date9 Sep 2017
DOIs
Publication statusPublished - 1 Oct 2017

Fingerprint

Investor protection
Portfolio allocation
Economics
Equity
Portfolio investment
Financial globalization
Investors
Foreign investors

Keywords

  • financial globalization
  • investor protection standards
  • equity home bias
  • equity foreign bias

Cite this

@article{bf6d6bdb1d48485383df23a8c6709bec,
title = "Biases in international portfolio allocation and investor protection standards",
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",
author = "Kwabi, {Frank O.} and Chandra Thapa and Krishna Paudyal and Emmnuel Adegbite",
year = "2017",
month = "10",
day = "1",
doi = "10.1016/j.irfa.2017.08.005",
language = "English",
volume = "53",
pages = "66--79",
journal = "International Review of Financial Analysis",
issn = "1057-5219",

}

Biases in international portfolio allocation and investor protection standards. / Kwabi, Frank O.; Thapa, Chandra; Paudyal, Krishna; Adegbite, Emmnuel.

In: International Review of Financial Analysis, Vol. 53, 01.10.2017, p. 66-79.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Biases in international portfolio allocation and investor protection standards

AU - Kwabi, Frank O.

AU - Thapa, Chandra

AU - Paudyal, Krishna

AU - Adegbite, Emmnuel

PY - 2017/10/1

Y1 - 2017/10/1

N2 - 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.

AB - 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.

KW - financial globalization

KW - investor protection standards

KW - equity home bias

KW - equity foreign bias

UR - http://www.scopus.com/inward/record.url?scp=85028968827&partnerID=8YFLogxK

U2 - 10.1016/j.irfa.2017.08.005

DO - 10.1016/j.irfa.2017.08.005

M3 - Article

VL - 53

SP - 66

EP - 79

JO - International Review of Financial Analysis

T2 - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -