Explain the meaning of the equity home bias

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Question 1: What is the main different between the interest rate parity and the law of one price for tradable goods?

Question 2: Explain the meaning of the equity home bias (EHB) coefficient and summarize the available evidence.

Question 3: Is it true that the higher the risk aversion the less sensitive is the share of home assets to the differential return between home and foreign assets?

Question 4: Is it true that the higher the correlation between home and foreign returns the lower the benefits of international diversification? What has happened with these correlations in recent years and during crises?

Question 5: Is it true that if investors have 99% of their portfolios in home assets, then those investors exhibit home bias?

Question 6: Why do we say that, based on a risk/return analysis, U.S. investors show home bias?

Reference no: EM132456223

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