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Home Bias Abroad: Domestic Industries and Foreign Portfolio Choice

83 Pages Posted: 12 Apr 2014 Last revised: 9 Sep 2016

David Schumacher

McGill University

Date Written: August 31, 2016


In their foreign portfolio allocations, international mutual funds overweight industries that are comparatively large in their domestic stock market. Aggregate excess foreign industry allocations are sizeable, on average amounting to over 100% for the largest domestic industries. I label this novel form of home bias a “foreign industry bias”. The interpretation that differences in the industrial composition of stock markets provide a proxy for persistent information asymmetries in international markets finds robust support in the data, consistent with the theory of van Nieuwerburgh and Veldkamp (2009).

Keywords: International Mutual Funds, Portfolio Choice, Industry Structure, Foreign Bias

JEL Classification: G11, G15, G23

Suggested Citation

Schumacher, David, Home Bias Abroad: Domestic Industries and Foreign Portfolio Choice (August 31, 2016). Available at SSRN: or

David Schumacher (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
5143984778 (Phone)


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