scholarly journals Model Uncertainty, Financial Market Integration and the Home Bias Puzzle

2008 ◽  
Author(s):  
Lieven Baele ◽  
Crina Pungulescu ◽  
Jenke R. ter Horst
Keyword(s):  
Financial Market ◽  
Model Uncertainty ◽  
Market Integration ◽  
Home Bias ◽  
Financial Market Integration ◽  
Home Bias Puzzle

scholarly journals Capital Market Integration in Euroland: The Role of Banks

2000 ◽  
Vol 1 (4) ◽  
pp. 443-464 ◽  
Author(s):  
Claudia M. Buch
Keyword(s):  
Financial Market ◽  
Risk Taking ◽  
Capital Market ◽  
Market Integration ◽  
Home Bias ◽  
Capital Market Integration ◽  
Clear Cut ◽  
Cross Border ◽  
Financial Market Integration

Abstract The introduction of the euro marks a milestone in the process of European financial market integration. This paper analyzes the implications of the euro for cross-border banking activities. A portfolio model is used which captures the role of banks as providers of informational and of risk-diversification services. By eliminating exchange rate risks, the euro enhances the incentives of banks to expand within Euroland. Yet, while the currency bias in bank portfolios will be eliminated, the home bias will remain. Implications of market integration for the risk-taking and the monitoring of banks are not clear-cut.

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