Abstract
This study uses repeated experiment to explore the possible reasons of home-bias investment. The results indicated that the reasons for home-bias investment are information asymmetry or familiarity, resulting in over-investment in Taiwanese investment vehicles. The level of home-bias investment changed with the level of information asymmetry changes. A significant difference in home-bias investment was observed for different levels of education, investment experience, age, annual income and annual investment. Moreover, the difference in investment ratio did not change based on different levels of information asymmetry.
Highlights
Today, cross-border investment barriers have been substantially reduced
The third objective of this study was to use an independent sample T test and correlation analysis to explore whether home-bias investment would change based on an investor’s personal variables and familiarity with domestic and foreign investment vehicles and, whether the difference in home-bias investment changed with an adjustment in the level of information asymmetry
This study explored whether there was significant correlation between a Taiwanese investor’s investment ratio and these personal variables and whether the correlation in the investment ratio varied significantly based on the level of information asymmetry
Summary
Cross-border investment barriers have been substantially reduced. Various studies showed that the main reason for investors to hold foreign investment vehicles is the increase of the rate of return or risk reduction. Karolyi and Stulz [1] reviewed the literature available on the international factors influencing the demand and prices of financial assets. They found that when cross-border investment barriers do not exist and the investor’s investment decisions are affected by the mean and variance of the return of investment (ROI) in invest vehicles of various countries, an investor’s portfolio should include investment vehicles in various countries
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