How important is foreign diversification? In this paper, we re-examine this question motivated by findings from the literature about foreign companies that are listed on US exchanges. Specifically, domestic portfolios including cross-listed stocks can provide the same diversification as foreign...

We develop an international financial market model in which domestic and foreign residents differ in their beliefs about the information in economic signals. Similar to models of asymmetric information, we consider how informational advantages by domestic investors about local output impacts...

Domestic investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest, a phenomenon called "equity home bias." In the absence of this bias, investors would optimally diversify domestic output risk using foreign...