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    Equity Home Bias, Financial Integration, and Regulatory Reforms: Implications for Emerging Asia

    Park, Cyn-Young; Mercado, Rogelio Jr. V. | May 2014
    Abstract
    With increasing financial integration and improving regulatory quality, we expect equity home bias to decline. Drawing on the supportive evidence for such trends in advanced economies, this paper investigates the links between financial integration and regulatory quality; and equity home bias in emerging Asia. To test the significance, a pooled OLS estimation was used. The results show that greater global and regional financial integration and better regulatory quality significantly lower equity home bias against global and regional stocks. The estimates also find that the lag value of the home bias significantly lowers equity home bias against global and regional equities; while bank assets and stock market capitalization increase the said bias against global and regional equities. Interestingly, volatility of foreign exchange rate significantly increases equity home bias against regional stocks, but not for the home bias against global stocks. The results suggest that if ongoing financial regulatory reforms lead to less information asymmetry and lower transaction and information costs in emerging Asia, equity home bias will continue to decline, allowing for greater portfolio diversification and more efficient allocation of capital resources.
    Citation
    Park, Cyn-Young; Mercado, Rogelio Jr. V.. 2014. Equity Home Bias, Financial Integration, and Regulatory Reforms: Implications for Emerging Asia. © Asian Development Bank. http://hdl.handle.net/11540/1294. License: CC BY 3.0 IGO.
    Keywords
    Regional Development Finance
    Public Scrutiny of City Finances
    Non-Bank Financial Institutions
    Local Government Finance
    Government Financial Institutions
    Foreign and Domestic Financing
    Financial Risk Management
    Assessing Corporate Governance
    Good Governance
    Governance Approach
    Public Accounting
    Business Financing
    Subsidies
    Social Equity
    Economic Equity
    Project Risks
    Project Impact
    Public Administration
    Corporations
    Taxing power
    Tax administration and procedure
    Tax policy
    Effect of taxation on labor supply
    Decentralization in government
    Community power
    Corporate divestment
    Civil government
    Delegation of powers
    Equality
    Neighborhood government
    Subnational governments
    Delivery of government services
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    Citable URI
    http://hdl.handle.net/11540/1294
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    Author
    Park, Cyn-Young
    Mercado, Rogelio Jr. V.
    Theme
    Finance
    Governance
    Small Medium Business
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise