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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Home Bias and High Turnover Reconsidered
Francis E. Warnock
2001-702  (April 2001, latest version December 2001)

Abstract:  The Tesar and Werner (1995) finding of very high turnover rates on foreign equity portfolios is based on an underestimation of cross-border equity positions. Foreign turnover rates calculated using information from comprehensive benchmark surveys on cross-border holdings are much lower than previously reported and comparable to domestic turnover rates. However, the basic intuition from the Tesar-Werner study, that transaction costs do not help explain the observed home bias, is confirmed using data on transaction costs in 41 markets.

Full paper, latest version (47 KB PDF)
Original version (48 KB PDF)

Keywords
transaction costs, international portfolio diversification, turnover rates

As Published Elsewhere
Journal of International Money and Finance (forthcoming)

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Last update: February 21, 2002