Security Home Bias and Skewness Preference: The Case of Taiwan

• Main Authors: Shu-Ling Chu, 朱淑玲
• Other Authors: Ching-Yi Lan
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/p84cvu

碩士 === 銘傳大學 === 經濟學系碩士班 === 97 === Higher-order preferences are introduced into international portfolio selection model toward resolving the home bias puzzle in this study. Under the mean-variance paradigm, investors engage in cross-border investments to diversify their risk globally. Yet higher-order preferences such as investors’ preference toward positively skewed portfolio return, their aversion to fat-tailed return distribution are all ignored in the model. As have been documented by Simkowitz and Reedles (1978) and Zilca (2004), diversification is not necessary desirable as it might also eliminate the skewness of their portfolio returns. This then shed light on the possibility that the ignorance over higher-order preferences might lead to a foreign portfolio weight that is overestimated. This possibility of resolving the home bias puzzle will be investigated with empirical studies of Taiwan.