Revisiting the home bias puzzle. Downside equity risk

  • Deviations from normality in financial return series have led to the development of alternative portfolio selection models. One such model is the downside risk model, whereby the investor maximizes his return given a downside risk constraint. In this paper we empirically observe the international equity allocation for the downside risk investor using 9 international markets’ returns over the last 34 years. The results are stable for various robustness checks. Investors may think globally, but instead act locally, due to greater downside risk. The results provide an alternative view of the home bias phenomenon, documented in international financial markets. JEL Classification: G11, G12, G15

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Author:Rachel A. Campbell, Roman KräusslORCiDGND
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2006,31
Series (Serial Number):CFS working paper series (2006, 31)
Document Type:Working Paper
Year of Completion:2006
Year of first Publication:2006
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2007/02/23
Tag:Asset Pricing; Downside Risk; Home Bias; Prospect Theory
GND Keyword:Capital-Asset-Pricing-Modell; Aktienportefeuille; Portfolio Selection
Issue:March 2006
Page Number:40
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht