Home Bias in International Equity Portfolios: A Review

37 Pages Posted: 30 Oct 2007

See all articles by Piet Sercu

Piet Sercu

FEB at KU Leuven

Rosanne Vanpee

KU Leuven Faculty of Economics and Business

Date Written: August 2007

Abstract

This paper reviews the recent literature on equity home bias - the empirical finding that people over invest in domestic stocks relative to the theoretically optimal investment portfolio. We cover different home bias measures and we illustrate the extent and the evolution of equity home bias both with recent portfolio holdings data and longer time series. Institutional-based and behavior-based explanations for the puzzle are considered and discussed. We conclude that none of the proposed theories can explain the full extent of the bias by itself, thus we argue that international portfolio choice should be explained by a mixture of rational and irrational behavior.

Suggested Citation

Sercu, Piet M. F. A. and Vanpee, Rosanne, Home Bias in International Equity Portfolios: A Review (August 2007). Available at SSRN: https://ssrn.com/abstract=1025806 or http://dx.doi.org/10.2139/ssrn.1025806

Piet M. F. A. Sercu

FEB at KU Leuven ( email )

Naamsestraat 69
Faculty of Economics and Business
Leuven, 3000
Belgium
+32 16 32 67 56 (Phone)
+32 16 32 67 32 (Fax)

Rosanne Vanpee (Contact Author)

KU Leuven Faculty of Economics and Business ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://scholar.google.be/citations?user=yhAZIHEAAAAJ&hl=en

Register to save articles to
your library

Register

Paper statistics

Downloads
1,915
rank
7,112
Abstract Views
5,418
PlumX