Home Bias, Transactions Costs, and Prospects for the Euro: A More Detailed Analysis

24 Pages Posted: 29 Jul 2002

See all articles by Catherine L. Mann

Catherine L. Mann

Brandeis University

Ellen E. Meade

Board of Governors of the Federal Reserve System

Abstract

This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.

Keywords: Home bias, Transactions costs, Euro, EMU, Europe, exchange rates, portfolio

JEL Classification: F2, F3, E5

Suggested Citation

Mann, Catherine L. and Meade, Ellen E., Home Bias, Transactions Costs, and Prospects for the Euro: A More Detailed Analysis. Available at SSRN: https://ssrn.com/abstract=318705 or http://dx.doi.org/10.2139/ssrn.318705

Catherine L. Mann (Contact Author)

Brandeis University ( email )

Waltham, MA
United States
978-505-8861 (Phone)

Ellen E. Meade

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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