Liberalism and Home Equity Bias
26 Pages Posted: 11 Jan 2009 Last revised: 4 May 2009
Date Written: January 9, 2009
Countries whose citizens have liberal ideals are less biased toward domestic equity. Data from 30 countries suggests that economic as well as social liberalism is associated with proportionally higher foreign equity holdings. A one standard deviation increase in the level of economic (social) liberalism relative to time-series and cross-sectional averages, is associated with a 5% (2%) relative decrease of home equity bias. These results hold after controlling for standard rational and behavioral explanations of the home equity bias as well as country and time fixed effects.
Keywords: HEB, home equity bias, liberalism
JEL Classification: G15, G19
Suggested Citation: Suggested Citation