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Globalization, home bias and asset prices

Xiaozheng Wang, 2009
Faculty Advisor: Geert Bekaert


This dissertation contains three chapters.

The first chapter examines a large number of potential home bias determinants, including some novel ones, using extensive panel data. I distinguish between the actual home bias (overinvestment in domestic securities) and foreign investment bias, for which I propose a new measure. For foreign investment bias, I also demonstrate how "size biases" significantly affect the results. I find that the old empirical results based on the U S data alone do not generalize to the panel data set; information and familiarity variables and proxies for the degree of capital market openness play an important role in explaining both home and foreign investment biases.

The second chapter, coauthored with Geert Bekaert, investigates whether the globalization process of the last thirty years has lead to "convergence" of asset prices in a wide set of countries, encompassing both developed and emerging markets. We examine several measures of convergence for interest rates (real and nominal) and bond and equity returns, and important fundamentals as inflation and earnings growth rates. While doing so, we extensively review the extant literature. Our results do not indicate strong effects of globalization on the convergence of asset prices, even though we document some links. In particular, financial openness matters relatively more than measures of corporate governance and political risk.

The third chapter investigates the effects of foreign investment and home bias on equity valuation at the country level using a panel data set I find that once country fixed effects are taken into account, home and foreign investment biases are not value relevant. However, stock market openness in itself is the most important factor for equity valuation at the aggregate level among all explanatory variables studied in this paper.

Doctoral Program News

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The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

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Abbie Wazlawek's joint research with Professor Daniel Ames is featured in the June 24th, 2014 edition of Ideas at Work

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Ethan Rouen featured in Ideas at Work

Ethan Rouen's joint research with Professor Dan Amiram is featured in the May 15th, 2014 edition of Ideas at Work

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Rivas Wins Fellowship

The PhD program is proud to congratulate Miguel Duro Rivas, who was awarded the Nasdaq Educational Foundation Doctoral Dissertation Fellowship.

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Wong wins Deloitte Fellowship

We are proud to announce that Yu Ting (Forester) Wong is one of the recipients of the 2014 Deloitte Foundation Doctoral Fellowship in Accounting.

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The PhD Program Congratulates John Yao

PhD student John Yao was a finalist in the 2013 M&SOM (Manufacturing & Service Operations Management) student paper competition.

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Honigsberg Named Postdoctoral Fellow

The PhD program is proud to congratulate Colleen Honigsberg, who was named the Postdoctoral Fellow in Corporate Governance at the Millstein Center at Columbia Law School in October 2013

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For Fall 2015 Entry:
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Regular Decision: Feb 15, 2015


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