Biases in international portfolio allocation and investor protection standards

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

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