Home Bias, an Academic Puzzle

Abstract

Only 23% of all empirical studies published in the top journals in the field of Finance examine non-U.S. markets, a fraction that is well below measures that reflect their economic importance. This “home bias” fluctuates across years over the last two decades but with no discernible trend in any direction. There is also a “foreign bias” in which some non-U.S. countries are more frequently the subject of published papers than others. I am unable to explain much of either the home-bias or the foreign-bias puzzles in Finance research using a variety of supply factors (number of published authors affiliated with non-U.S. universities, number of Ph.D. students graduating from non-U.S. programs), demand factors (market returns, volatilities, portfolio flows), and other factors that have been shown to explain the home- and foreign-bias phenomenon in international portfolio holdings. I discuss the implications of these findings.

Keywords: International finance, Globalization, Research trends in finance

JEL Classification: G10, F60, A14