Corporate Governance and the Home Bias

Download or read book Corporate Governance and the Home Bias written by Lee Pinkowitz and published by . This book was released on 2012 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: In most countries, many of the largest corporations are controlled by large shareholders. We show that, under reasonable assumptions, this stylized fact implies that portfolio holdings of U.S. investors should exhibit a home bias in equilibrium. We construct an estimate of the world portfolio of shares available to investors who are not controlling shareholders. This available world portfolio differs sharply from the world market portfolio. In regressions explaining the portfolio weights of U.S. investors, the world portfolio of available shares has a positive significant coefficient but the world market portfolio has no additional explanatory power. This result holds when we control for country characteristics.