Mishra, Anil V. (2008) Australia's equity home bias. Australian Economic Papers, 47 (1). pp. 53-73. ISSN 0004-900X
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Identification Number or DOI: doi: 10.1111/j.1467-8454.2008.00329.x
This paper constructs the float adjusted measure of home bias and explores the determinants of Australia’s equity home bias by employing the International Monetary Fund’s high quality dataset (2001 to 2005) on cross border equity investment. On the empirical front, the paper conducts robustness tests by employing instrumental variables that are standard in the financial economics literature. The paper finds that the share of the number of firms listed in the domestic market and the share of internet users in the total population of the host country has a significant impact on equity home bias. Trade linkages are found to have a mixed impact on equity home bias. The paper also finds that the country’s market share of the world market capitalisation and transaction costs do not impact Australia’s equity home bias. Investors are found to exhibit low diversification motives.
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