This paper presents a rational expectations model of asset prices with rationally inattentive investors that, unlike previous papers, explains both the substantial amount of equity wealth invested domestically and the puzzling time series behavior of the home bias - an initial plateau before...

The empirical joint distribution of return-pairs on stock indices displays high tail-dependence in the lower tail and low tail-dependence in the upper tail. The presence of tail-dependence is not compatible with the assumption of (conditional) joint normality. The presence of asymmetric-tail...