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Biases in international portfolio allocation and investor protection standards

Kwabi, Frank O.; Thapa, Chandra; Paudyal, Krishna; Adegbite, Emmanuel

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Authors

Frank O. Kwabi

Chandra Thapa

Krishna Paudyal

EMMANUEL ADEGBITE EMMANUEL.ADEGBITE@NOTTINGHAM.AC.UK
Professor in Accounting and Corporate Governance



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.

Citation

Kwabi, F. O., Thapa, C., Paudyal, K., & Adegbite, E. (2017). Biases in international portfolio allocation and investor protection standards. International Review of Financial Analysis, 53, 66-79. https://doi.org/10.1016/j.irfa.2017.08.005

Journal Article Type Article
Acceptance Date Aug 22, 2017
Online Publication Date Sep 9, 2017
Publication Date 2017-10
Deposit Date Aug 29, 2018
Publicly Available Date Mar 10, 2019
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 53
Pages 66-79
DOI https://doi.org/10.1016/j.irfa.2017.08.005
Keywords Financial globalization; Investor protection standards; Equity home bias; Equity foreign bias
Public URL https://nottingham-repository.worktribe.com/output/1050813
Publisher URL https://www.sciencedirect.com/science/article/pii/S1057521917300984
Contract Date Aug 29, 2018

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