TY  - JOUR
AU  - Lewis,Karen K.
TI  - International Home Bias in International Finance and Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6351
PY  - 1998
Y2  - January 1998
UR  - http://www.nber.org/papers/w6351
L1  - http://www.nber.org/papers/w6351.pdf
N1  - Author contact info:
Karen K. Lewis
Department of Finance, Wharton School
2300 SHDH
University of Pennsylvania
Philadelphia, PA 19104-6367
Tel: 215/898-7637
Fax: 215/898-6200
E-Mail: lewisk@wharton.upenn.edu
AB  - Domestic investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest.  This phenomenon has been called equity home bias.'  In the absence of this home bias, investors would optimally diversify away domestic output risk.  Therefore, in a world without investor home bias, consumption growth rates would tend to comove across countries even when output growth rates do not.  Empirically, however, consumption growth rates tend to have a lower correlation across countries than do output growth rates.  Moreover, consumption growth in each country appears to be highly correlated with its own output growth relative to the world.  This phenomenon may be called consumption home bias.'  In this paper, I evaluate existing explanations for these two types of home bias.
ER  -