ASYMMETRIC INFORMATION, MORAL HAZARD, AND THE HOME BIAS IN INTERNATIONAL PORTFOLIO INVESTMENTS

This project strives to explain the dominance of domestic securities, the 'home bias', in asset portfolios in all countries around the world. Another puzzling observation related to this phenomenon, that the project also attempts to explain, is the huge turnover in international stocks relative to their aggregate value. The project looks for a plausible explanation for these observations in the specific time-varying nature of asymmetric information costs that characterize foreign investments.