Exploring the cost of home bias in international equity investment

This paper examines the cost of home bias across 37 countries, employing various methodologies, including deadweight costs and implicit costs on international equity investment. Utilizing the DECO-MGARCH model, the average implicit cost of home bias on international equity investment for stock holdings ranges from 0.43% per annum (France) to 7.15% per annum (Türkiye), indicating a decrease compared to prior research findings. The average implicit cost of home bias in international equity investment for the sample countries is lower when considering human capital. The implicit costs of international equity markets are notably higher for emerging markets compared to developed ones. These implicit costs are found to be associated with factors such as information asymmetries, financial development, and institutional structures.