000			02733cam a22003257 4500
001			w12473
003			NBER
005			20211020112229.0
006			m o d
007			cr cnu||||||||
008			210910s2006 mau fo 000 0 eng d
100	1		_aAmadi, Amir.
245	1	0	_aUnderstanding International Portfolio Diversification and Turnover Rates / _cAmir Amadi, Paul Bergin.
260			_aCambridge, Mass. _bNational Bureau of Economic Research _c2006.
300			_a1 online resource: _billustrations (black and white);
490	1		_aNBER working paper series _vno. w12473
500			_aAugust 2006.
520	3		_aThis paper argues that fixed trading costs in international asset markets help explain equity home bias. This contrasts with explanations prevalent in international macroeconomics, which tend to be based on trading frictions instead in international goods markets, such as nontraded goods or transportation costs. While the stylized fact of high trading turnover in foreign holdings has been interpreted as evidence against international asset trading costs, we show that this argument only applies to costs that are proportional to trade, and not to fixed costs of entering the foreign market. After documenting that the home bias and turnover stylized facts remain valid in recent data, the paper constructs a very simple portfolio allocation model with various configurations of trading costs and with heterogeneous types of traders. A configuration with per unit costs heterogeneous among agents and a homogeneous fixed cost is found to replicate the pair of stylized facts. Intuitively, the lower trading costs that characterize larger and more efficient traders have two implications: firstly, these traders find it more profitable to enter foreign markets; secondly, their lower trading costs encourage a higher rate of trading turnover. Since holdings of international equities are disproportionately dominated by this class of larger and more efficient traders, average trading turnover is higher among international holdings.
530			_aHardcopy version available to institutional subscribers
538			_aSystem requirements: Adobe [Acrobat] Reader required for PDF files.
538			_aMode of access: World Wide Web.
588	0		_aPrint version record
690		7	_aF36 - Financial Aspects of Economic Integration _2Journal of Economic Literature class.
700	1		_aBergin, Paul.
710	2		_aNational Bureau of Economic Research.
830		0	_aWorking Paper Series (National Bureau of Economic Research) _vno. w12473.
856	4	0	_uhttps://www.nber.org/papers/w12473
856			_yAcceso en línea al DOI _uhttp://dx.doi.org/10.3386/w12473
942			_2ddc _cW-PAPER
999			_c335668 _d294230