Home Bias in International Equity Portfolios: A Review

By P. Sercu, Rosanne Vanpée. 2007

111 citations recorded by the source corpus.

This paper reviews the recent literature on equity home bias - the empirical finding that people over invest in domestic stocks relative to the theoretically optimal investment portfolio. We cover different home bias measures and we illustrate the extent and the evolution of equity home bias both with recent portfolio holdings data and longer time series. Institutional-based and behavior-based explanations for the puzzle are considered and discussed. We conclude that none of the proposed theories can explain the full extent of the bias by itself, thus we argue that international portfolio choice should be explained by a mixture of rational and irrational behavior.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/048c4007b8581f9dad73d412f9c48afa19d48c12

Citations in the corpus

• Financial Crash, Commodity Prices, and Global Imbalances (2008, unknown): “For instance, we have seen that in the case of a unit elasticity (σ = 1), aggregate wealth remains unchanged at impact. 34. Greenlaw and others (2008). 35.”
• Rethinking the Effects of Financial Globalization (2016, unknown): “See the surveys by Lewis (1999), Karolyi and Stultz (2003), and Sercu and Vanpée (2007).”