Home bias, investor sentiments and international portfolio management

Pao Yue-kong Library Electronic Theses Database

Home bias, investor sentiments and international portfolio management

 

Author: Chiang, Hsin Eric
Title: Home bias, investor sentiments and international portfolio management
Degree: D.B.A.
Year: 2014
Subject: Portfolio management
Investments.
Hong Kong Polytechnic University -- Dissertations
Department: Faculty of Business
Pages: viii, 102 leaves : color illustrations ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2825657
URI: http://theses.lib.polyu.edu.hk/handle/200/7981
Abstract: We propose and analyze an international portfolio trading strategy based on the prevailing risk assessments and investment sentiments. In particular, we study the performance impact of a hypothetical global portfolio with the country allocation driven by varying degrees of equity home bias which, in turn, are modulated by changes in investor sentiments. Using the United States as the home base, we gear our model portfolios towards more international equities when the overall investor sentiment becomes bullish ("risk-on"); and when the sentiment turns bearish ("risk-off"), our portfolio is then geared more towards US equities.Our findings suggest that such a trading strategy could indeed produce significant outperformance alpha when compared to a benchmark market-cap-weighted global market portfolio. The outperformance might be attributed to a general mis-valuation across equity markets during extreme investment sentiment conditions. When such mis-valuation attracts international capital flows across borders, the subsequent correction in mis-valuation can help us realize trading profits. Our finding also indicates the possible existence, at the global level, of a variation in equity home bias according to the prevailing investor sentiments that have only been documented at the regional level in the literature today.

Files in this item

Files Size Format
b28256578.pdf 2.172Mb PDF
Copyright Undertaking
As a bona fide Library user, I declare that:
  1. I will abide by the rules and legal ordinances governing copyright regarding the use of the Database.
  2. I will use the Database for the purpose of my research or private study only and not for circulation or further reproduction or any other purpose.
  3. I agree to indemnify and hold the University harmless from and against any loss, damage, cost, liability or expenses arising from copyright infringement or unauthorized usage.
By downloading any item(s) listed above, you acknowledge that you have read and understood the copyright undertaking as stated above, and agree to be bound by all of its terms.

     

Quick Search

Browse

More Information