Determinants of Home Bias: Evidence From European Equity Funds

39 Pages Posted: 11 Apr 2019

See all articles by Moritz Maier

Moritz Maier

Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)

Hendrik Scholz

Friedrich-Alexander-Universität Erlangen-Nürnberg

Date Written: January 29, 2019

Abstract

This paper analyzes determinants of home bias in equity funds based on monthly holdings data using panel and quantile regressions. We investigate 699 equity funds, domiciled in fifteen European countries, that broadly invested in European stocks from January 2003 to December 2016. More than ninety percent of our sample funds show, on average, a home bias. In addition, the home bias across funds is quite stable over time. Analyzing the determinants of this home bias, our empirical results from panel regressions indicate that macroeconomic development, stock market development and fund-specific characteristics have, on average, a significant influence on the home bias of individual funds. Applying quantile regressions, we find the effects of several determinants, such as real growth in the gross domestic product, past excess return of the domestic stock market or number of stocks held by funds to be clearly related to the funds’ level of home bias. Further analyses of subportfolios of funds show that informational advantages do not seem to be a reason for the observed home bias.

Keywords: Home Bias, Equity Mutual Funds, Quantile Regression, Fund Performance, Holdings Data

JEL Classification: G11, G12, G14, G23

Suggested Citation

Maier, Moritz and Scholz, Hendrik, Determinants of Home Bias: Evidence From European Equity Funds (January 29, 2019). Available at SSRN: https://ssrn.com/abstract=3354503 or http://dx.doi.org/10.2139/ssrn.3354503

Moritz Maier (Contact Author)

Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU) ( email )

Erlangen-Nürnberg
Lange Gasse 20,
Nurnberg
Germany

Hendrik Scholz

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Lange Gasse 20,
Nürnberg, 90403
Germany

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