Attempts To Resolve The Puzzle
One hypothesis is that capital is internationally immobile across countries, yet this is hard to believe given the volume of international capital flows among countries.
Another hypothesis is that investors have superior access to information about local firms or economic conditions. But as van Nieuwerburgh and Veldkamp (2005) point out, this seems to replace the assumption of capital immobility with the assumption of information immobility.
In some countries, like Belgium, holding stocks of foreign companies implies a double taxation on dividends, once in the country of the company and once in the country of the stockholder, while domestic stock dividends are taxed only once.
Read more about this topic: Equity Home Bias Puzzle
Famous quotes containing the words attempts to, attempts, resolve and/or puzzle:
“Good resolutions are useless attempts to interfere with scientific laws. Their origin is pure vanity. Their result is absolutely nil. They give us, now and then, some of those luxurious sterile emotions that have a certain charm for the weak.... They are simply cheques that men draw on a bank where they have no account.”
—Oscar Wilde (1854–1900)
“Prohibition will work great injury to the cause of temperance. It is a species of intemperance within itself, for it goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation, and makes a crime out of things that are not crimes. A Prohibition law strikes a blow at the very principles upon which our government was founded.”
—Abraham Lincoln (1809–1865)
“Then climate is a great impediment to idle persons; we often resolve to give up the care of the weather, but still we regard the clouds and the rain.”
—Ralph Waldo Emerson (1803–1882)
“The at present unutterable things we may find somewhere uttered. These same questions that disturb and puzzle and confound us have in their turn occurred to all the wise men; not one has been omitted; and each has answered them, according to his ability, by his words and his life.”
—Henry David Thoreau (1817–1862)