Familiarity Breeds Investment

35 Pages Posted: 21 Dec 1999

See all articles by Gur Huberman

Gur Huberman

Columbia Business School - Finance and Economics

Date Written: November 1999

Abstract

We examine the geographic distribution of the shareholders of the U.S. Regional Bell Operating Companies (RBOCs) and document that a customer of an RBOC is more likely to invest in his local company than in an RBOC in another service area. Holdings of the local RBOC tend to be larger than investments in RBOCs that serve other areas. We relate these observations to the general tendency of people to have concentrated portfolios, to the tendency of workers to hold their own company?s stock in their retirement accounts and the home country bias in the international arena. Together, these phenomena provide compelling evidence that people invest in the familiar while often ignoring the principles of portfolio theory. Survey results point in the same direction, and suggest that wishful thinking plays a role in portfolio allocation.

JEL Classification: F36, D10, D81, D84, G11, G15, G23

Suggested Citation

Huberman, Gur, Familiarity Breeds Investment (November 1999). Available at SSRN: https://ssrn.com/abstract=199314 or http://dx.doi.org/10.2139/ssrn.199314

Gur Huberman (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

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