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The Spatial Impact of Cultural Distances on Home Bias across Asian Emerging Markets

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Using a set of individual country-pair data on cross-border equity transactions between seven Asian countries (China, Japan, Korea, Malaysia, Singapore, Thailand, and Australia) in the years 2002–2012, we document that investors are more likely to show similar extent of home bias across Asian emerging markets than the developed markets. The spatial panel regression analysis indicates that the spillover effects of cultural and economic distances are more significant than the effect of geometric distance. Investors’ familiarity about Asian countries seems to influence the similar extent of home bias across Asian financial markets, while not so in the developed countries. In particular, the spatial spillover influences of risk associated with cultural and economic distances are more prominent among the Asian financial markets than the developed countries. Our home bias model can be spatially applied to not only different regions but also to different types of investors in international portfolio flows.

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    Portes and Rey (2005) considered gravity-type variables as the determinants of international portfolio flows, taking the telephone call traffic and degree of overlap in trading hours and multinational bank branches to represent information transmission and the index of degree of insider trading to represent the information asymmetries between domestic and foreign investors.


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I would like to thank the anonymous referees for their great comments on the revision of the article. Remaining error are our own.

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Correspondence to Heeho Kim.

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Kim, H. The Spatial Impact of Cultural Distances on Home Bias across Asian Emerging Markets. Atl Econ J 45, 81–101 (2017). https://doi.org/10.1007/s11293-017-9532-z

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  • Home bias
  • Culture spatial dependence
  • Asian emerging markets
  • Portfolio risk


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  • F3
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