Do Domestic and Foreign Fund Managers Have Similar Preferences for Stock Characteristics? A Cross-Country Analysis
Journal of International Business Studies, Forthcoming
44 Pages Posted: 5 Jul 2001
Using a new and unique dataset on mutual fund stockholdings, we identify several interesting similarities and differences in the stock preferences of domestic and foreign fund managers from 11 developed countries. Our results show that both groups of fund managers consider basic stock characteristics important in their investment decisions. However, foreign managers, while not domestic managers, tend to be biased towards globally visible stocks, even after controlling for investment styles. The demand for such stocks is strong when the objective of their funds is to diversify globally or across regions, but weakens when their stock holdings are concentrated mainly in the same local market as domestic managers. The latter implies that the geographic location of managers might matter. Finally, the results also show that managers from three different regional markets exhibit similar stock preferences.
Keywords: home bias, fund managers, institutional trading, foreign, domestic, stock characteristics
JEL Classification: F3, G1, G2
Suggested Citation: Suggested Citation