Home Bias in Foreign Investment Decisions
This paper shows that the home bias is more widespread than once thought. Evidence of the strong investor preference for domestic firms is pervasive not only in international and domestic financial markets, but also in the foreign investment decisions of domestic investors. In contrast to all existing studies that focus on investors’ bias toward domestic firms, our research work examines the bias of domestic investors toward foreign firms with presence in their home market. Analyzing the equity holdings of more than 3,000 mutual funds from 22 developed and developing countries worldwide, we find robust evidence that mutual fund managers (all non-U.S. managers) strongly prefer to invest in stocks of U.S.-headquartered firms that have presence in their home country. The home bias behavior is independent of the differences in the cultural background, country of location, and spoken language of this diverse group of mutual fund managers. These professional money managers increase their propensity to invest in a U.S. firm and also to increase their holding weight in the firm’s stock after it first establishes presence in their home country. Finally, results suggest that fund managers’ familiarity bias explains their strong preference for foreign firms with local presence.
Foreign investments Mutual Funds and Local Presence
Dongmin Ke Lilian Ng Qinghai Wang
School of Business Administration, University of Wisconsin-Milwaukee, Milwaukee, P.O. Box 742, WI 53201-0742
国际会议
昆明
英文
1-45
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）