Using the sample of Taiwanese firms listing in Hong Kong Exchange, this paper argued whether the fair price of the foreign firms was related the specific clustering effect of stock exchanges. This clustering effect supported that the investors were constraint by the home-bias and would discount the equity price of foreign firms which belonged to unfamiliar industry. For several matching methods of propensity score, the results can’t find the significant evidence of discount bias for Taiwanese firms listing in Hong Kong Exchange. This finding is robust when we use the ratio of market-to-book value and the ratio of price to earnings.
