Equity Home Bias Puzzle: A Revisit

ABSTRACT The study estimates the extent of equity home bias (EHB) using a robust mean‐CVaR optimization technique and International Capital Asset Pricing Model (I‐CAPM) for the G7 and BRICS group of countries to investigate whether the latter approach overestimates the EHB. We also examine whether EHB changes over time. Our findings suggest that I‐CAPM overestimates EHB for developed countries. The study also reveals a downward trend in EHB for developed countries, while it finds no significant trend for emerging countries. By using a sophisticated technique to estimate EHB more accurately, the study offers a deeper understanding of the EHB puzzle.