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Home Bias in European Countries within a Bayesian Framework

Asgharian, Hossein LU and Hansson, Björn LU (2006) In Journal of International Financial Markets, Institutions, and Money 16(5). p.397-410
Abstract
This paper determines to what extent the estimated expect returns on European equity indices will be affected by different degrees of prior confidence in the ICAPM. We also measure how fragile the investors’ prior confidence in ICAPM should be in order to explain the home bias of European pension funds. A Bayesian approach is used to estimate the expected asset returns under different prior scenarios. We show that a moderate mistrust in ICAPM results in estimates of the expected returns, which substantially deviate from the estimates by ICAPM. Furthermore, we find a strong home bias in most countries, which cannot be explained by any degree of disbelief in the ICAPM.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Bayesian approach, Home bias, ICAPM
in
Journal of International Financial Markets, Institutions, and Money
volume
16
issue
5
pages
397 - 410
publisher
North-Holland
external identifiers
  • scopus:33750027434
ISSN
1042-4431
DOI
10.1016/j.intfin.2005.05.003
language
English
LU publication?
yes
id
891c29a4-cfdb-4fbe-b66c-3fa8fb744935 (old id 1384518)
date added to LUP
2009-04-20 12:27:13
date last changed
2018-11-21 20:09:17
@article{891c29a4-cfdb-4fbe-b66c-3fa8fb744935,
  abstract     = {This paper determines to what extent the estimated expect returns on European equity indices will be affected by different degrees of prior confidence in the ICAPM. We also measure how fragile the investors’ prior confidence in ICAPM should be in order to explain the home bias of European pension funds. A Bayesian approach is used to estimate the expected asset returns under different prior scenarios. We show that a moderate mistrust in ICAPM results in estimates of the expected returns, which substantially deviate from the estimates by ICAPM. Furthermore, we find a strong home bias in most countries, which cannot be explained by any degree of disbelief in the ICAPM.},
  author       = {Asgharian, Hossein and Hansson, Björn},
  issn         = {1042-4431},
  keyword      = {Bayesian approach,Home bias,ICAPM},
  language     = {eng},
  number       = {5},
  pages        = {397--410},
  publisher    = {North-Holland},
  series       = {Journal of International Financial Markets, Institutions, and Money},
  title        = {Home Bias in European Countries within a Bayesian Framework},
  url          = {http://dx.doi.org/10.1016/j.intfin.2005.05.003},
  volume       = {16},
  year         = {2006},
}