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Policy Research Working Papers
The home equity bias is one of the many puzzles existing in international finance. This puzzle is characterized by the concentration of domestic equity in any investor's portfolio, which is in contradiction with the benchmark of full diversification in a world mutual fund. Based on Admati's (1985) and Gehrig's (1993) noisy rational expectation models, this paper attempts to explain the effect of asymmetric information in the home equity bias puzzle. While asymmetric information helps to explaindoi:10.1596/1813-9450-3495 fatcat:etkb4l65bfbjnn6mpxctj5etbm