Private Information, Human Capital, and Optimal "Home Bias" in Financial Markets
---- Acknowledgments ----
This working paper was entitled "Human Capital, Endogenous Information Acquisition, and Home Bias in Financial Markets" in its previous incarnation. This paper is a significantly expanded version of an earlier draft that was presented in the conference "New Directions in the Economic Analysis of Education" sponsored by the Milton Friedman Institute of the University of Chicago and the Center for Human Capital at SUNY Buffalo on November 20-21 2009. It is based on joint work by Isaac Ehrlich and Jong Kook Shin when Ehrlich was a visiting scholar at the Hong Kong Institute of Monetary Research in spring 2009 and on Shin's dissertation. Yong Yin is responsible for the micro-level empirical analysis and has generally contributed to the research on this project. We are grateful to participants at the conference, as well as to Steven Turnovsky and an anonymous referee for many helpful suggestions on subsequent drafts.