What drives home bias? Evidence from fund managers' views

Abstract

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Portfolio Selection of German Investors: On the Causes of Home-biased Investment Decisions

“…Shiller, Kon-ya and Tsutsui [1991] and French and Poterba [1991] show that domestic investors tend to be more optimistic about domestic market returns than foreign investors are. Lütje and Menkhoff [2004] report similar results for German fund managers. Van Nieuwerburgh and Veldkamp [2004a] point out that the assumption of information being tradable and easy to acquire is flawed.…”

“…Only a few studies focus on the analysis of German individual and institutional investors' behavior. Despite some recent attempt by Maurer and Mertz [2000], Lütje and Menkhoff [2004], and -with a focus on the equity market -by von Nitzsch and Stotz [2005] We analyze the portion of foreign investments for mutual funds which are sold to private investors (Panel A) and those sold to (financial) institutions and firms (Panel B) from 1990-2006 based on German Central Bank data. Column 1 shows the foreign share for mutual funds which mainly invest in equities (more than 50% of the funds' assets).…”

My global fund portfolio is not yours: the effect of home bias on European- and US-managed convertible bond fund exposures

“…Related to domestic bias, several authors document a more general local bias in which portfolio managers bias their portfolio towards companies that are geographically close in general Moskowitz 1999, 2001;Pool, Stoffman, and Yonker 2012). Overall, the documented deviations from optimal portfolio allocation in favor of domestic (or even local) firms could be motivated by behavioral factors like overconfidence and relative return optimism (Lütje and Menkhoff 2007), informational advantages (Coval and Moskowitz 2001), or portfolio manager characteristics like experience (Pool, Stoffman, and Yonker 2012 …”

Foreign bias in Australian-domiciled mutual fund holdings

“…Coen (2001) and Pesenti and Van Wincoop (2002) focus on the effects of non-tradables on home bias. Strong and Xu (2003); Suh (2005) and Lutje and Menkhoff (2007) focus on behavioural explanations of home bias. Dahlquist et al (2003) and Kho et al (2009) link corporate governance and home bias.…”