Foreign exposure through domestic equities

Fang Cai and Francis Warnock

Finance Research Letters, 2012, vol. 9, issue 1, 8-20

Abstract: We show that US investors obtain substantial foreign exposure through their holdings of domestic equities. Domestic multinationals, in particular, provide significant foreign exposure. We also find that, although the average US investor is less tilted toward domestic multinationals, institutional investors do overweight domestic firms that are more internationally oriented. ‘Indirect’ foreign holdings through domestic multinationals are shown to be substantial; combining them with reported data on international positions almost doubles US investors’ total ‘foreign’ holdings. Our findings indicate that the home bias is not as severe as assessments based on reported international investment statistics suggest.

Keywords: Home bias; International portfolio allocation; Multinationals (search for similar items in EconPapers)
JEL-codes: F21 F23 G11 G15 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:9:y:2012:i:1:p:8-20

DOI: 10.1016/j.frl.2011.12.001

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