Home Bias Revisited

62 Pages Posted: 19 Feb 2009

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Xiaozheng Sandra Wang

PriceWaterhouseCoopers LLP - Financial services

Date Written: February 16, 2009

Abstract

We examine a large number of potential home bias determinants, including some novel ones, using extensive panel data. We distinguish between the actual home bias (over investment in domestic securities) and foreign investment bias, for which we propose a new measure. For foreign investment bias, we also demonstrate how "size biases" significantly affect the results. We find that the old empirical results based on the U.S. data alone do not generalize to the panel data set; information and familiarity variables and proxies for the degree of capital market openness play an important role in explaining both home and foreign investment biases.

Keywords: Home bias, international asset allocation, portfolio choice, international diversification

JEL Classification: F36, F37, G15

Suggested Citation

Bekaert, Geert and Wang, Xiaozheng Sandra, Home Bias Revisited (February 16, 2009). Available at SSRN: https://ssrn.com/abstract=1344880 or http://dx.doi.org/10.2139/ssrn.1344880

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Xiaozheng Sandra Wang (Contact Author)

PriceWaterhouseCoopers LLP - Financial services ( email )

1800 Tysons Blvd.
McLean, VA 22102
United States

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