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International Portfolio Choice and the Effect of Information Costs

Bellalah, Makram; Bellalah, Mondher (2001), International Portfolio Choice and the Effect of Information Costs. https://basepub.dauphine.fr/handle/123456789/9786

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Type
Document de travail / Working paper
Date
2001
Publisher
Université Paris-Dauphine
Series title
Cahiers de recherche CEREG (DRM)
Series number
2001-05
Published in
Paris
Pages
21
Metadata
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Author(s)
Bellalah, Makram
Bellalah, Mondher
Abstract (EN)
This paper presents a model of international asset pricing in the presence of shadow costs of incomplete information. The model shows that the exchange rate risk is priced in an international setting. The home bias equity is explained by the shadow costs of incomplete information. These costs are defined in the spirit of Merton (1987) model of capital market equilibrium with incomplete information. The model supports the empirical findings in Kang and Stulz (1997) and Dahlquist and Robertsson (2000).
Subjects / Keywords
incomplete information; international asset pricing
JEL
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G12 - Asset Pricing; Trading Volume; Bond Interest Rates