Abstract

http://ssrn.com/abstract=2189928
 
 

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The Home(-Sickness) Bias of Foreign Holdings


Quoc H. Nguyen


University Of Illinois at Urbana-Champaign - Department of Finance

December 18, 2012


Abstract:     
The well documented "Equity home bias puzzle" refers to the fact that investors tend to hold poorly diversified portfolios by favoring domestic stocks over international stocks. However, I show that even holdings of international stocks exhibit a form of home bias. I find that U.S. mutual funds invest significantly more in countries that have a strong associated ethnic group population near the funds' offices. Mutual funds that take advantage of the information generated by the local ethnic groups out-perform otherwise similar funds by more than 1.4% per quarter in their foreign holdings. This paper documents a new form of home bias, sheds light on a new information channel for foreign investment decisions, and contributes to the debate on whether mutual fund managers have skills.

Number of Pages in PDF File: 41

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Date posted: December 16, 2012 ; Last revised: December 18, 2012

Suggested Citation

Nguyen, Quoc H., The Home(-Sickness) Bias of Foreign Holdings (December 18, 2012). Available at SSRN: http://ssrn.com/abstract=2189928 or http://dx.doi.org/10.2139/ssrn.2189928

Contact Information

Quoc Hoai Nguyen (Contact Author)
University Of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
217-721-7458 (Phone)
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References:  47
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