by Maela Giofré; WP CeRP 74/08 Abstract
Non professional investors display a much higher degree of home bias than financial investors suggesting that they might be more severely affected by information asymmetry issues. In particular, non professional investors, having less easily access to information on foreign firm-specific characteristics than institutional investors, will rely more heavily on country-specific factors. We test this conjecture considering foreign equity portfolios of four European investing countries – France, Italy, Spain and Sweden. We find, indeed, that households’ portfolios are more strongly influenced by proximity variables, transparency of the destination stock market and, even more interestingly, by common-listing in the Euronext platform.
JEL: F30, G11, G15
Keywords: portfolio choice, international diversification, information asymmetries, cross-listing, household finance
May 2008