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Australia's Bond Home Bias

Author

Listed:
  • Anil V. Mishra

    (School of Business, University of Western Sydney, NSW 2751, Australia)

  • Umaru B. Conteh

    (School of Business, University of Western Sydney, NSW 2751, Australia)

Abstract

This paper constructs the float adjusted measure of home bias and explores the determinants of bond home bias by employing the International Monetary Fund's high quality dataset (2001 to 2009) on cross-border bond investment. The paper finds that Australian investors' prefer investing in countries with higher economic development and more developed bond markets. Exchange rate volatility appears to be an impediment for cross-border bond investment. Investors prefer investing in countries with stronger quality of institutions including bureaucratic quality, government effectiveness, regulatory quality, rule of law, efficiency of judicial system, risk of contract repudiation, and rating of accounting standards.

Suggested Citation

  • Anil V. Mishra & Umaru B. Conteh, 2014. "Australia's Bond Home Bias," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-30.
    • Handle: RePEc:wsi:rpbfmp:v:17:y:2014:i:01:n:s0219091514500015
    DOI: 10.1142/S0219091514500015
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    References listed on IDEAS

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    1. Coeurdacier, Nicolas & Gourinchas, Pierre-Olivier, 2016. "When bonds matter: Home bias in goods and assets," Journal of Monetary Economics, Elsevier, vol. 82(C), pages 119-137.
    2. Kindleberger, Charles P., 1993. "A Financial History of Western Europe," OUP Catalogue, Oxford University Press, edition 2, number 9780195077384.
    3. Michael D. Bordo & Alan M. Taylor & Jeffrey G. Williamson, 2003. "Globalization in Historical Perspective," NBER Books, National Bureau of Economic Research, Inc, number bord03-1.
    4. John D. Burger & Francis E. Warnock, 2003. "Diversification, original sin, and international bond portfolios," International Finance Discussion Papers 755, Board of Governors of the Federal Reserve System (U.S.).
    5. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    6. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373.
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    Cited by:

    1. Maxime MERLI & Antoine PARENT, 2022. "Portfolio Diversification During the Belle Époque: When the Actual Portfolios of French Individual Investors Met Behavioral Finance," Working Papers of LaRGE Research Center 2022-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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    More about this item

    Keywords

    Coordinated portfolio investment survey; float bond home bias; quality of institutions; Arellano–Bover/Blundell–Bond; G15; G23;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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