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...

In this paper, we decompose attention allocation in two components -- the familiar and the surprising -- with opposite implications for US purchases of foreign stocks. On one hand, familiarity-induced attention leads to an increase in US holdings of foreign equities. On the other hand,...

We study the asset pricing implications of attention allocation theories. These theories allow us to predict the arrival of private information by observing investors' behavior. Specifically, attention allocation theories suggest that the arrival of private news to local investors lead to an...

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

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

The challenge of evaluating asymmetric information theories relies on assessing the pieces of information investors decide to process. This paper overcomes such challenge exploring a unique dataset containing the "search/click-through" behavior of internet search engine users. We analyze the...

This paper explains the home equity bias and its puzzling evolution in a model where investors face an information constraint and have an initial local informational advantage. After financial liberalization, local investors have a magnified informational advantage since information processed...

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

This paper explores the joint determination of home bias and attention allocation. We overcome the typical challenge associated with evaluating attention allocation theories by using a new internet search query dataset to measure how much information investors decide to process. Employing an...