What drives home bias? Evidence from fund managers' views
Article first published online: 25 JAN 2007
Copyright © 2007 John Wiley & Sons, Ltd.
International Journal of Finance & Economics
Volume 12, Issue 1, pages 21–35, January 2007
How to Cite
Lütje, T. and Menkhoff, L. (2007), What drives home bias? Evidence from fund managers' views. Int. J. Fin. Econ., 12: 21–35. doi: 10.1002/ijfe.309
- Issue published online: 25 JAN 2007
- Article first published online: 25 JAN 2007
- Wissenschaftsförderung der Sparkassen-Finanzgruppe e.V.
- Home bias;
- institutional investors;
- local information advantage;
- non-fundamental information;
- disposition effect
A new survey of fund managers reveals home bias for these sophisticated investors in a setting being unrestricted by customer preferences or legal requirements. We confirm informational and behavioural determinants of home bias and find them to hold simultaneously. Further examinations of potential characteristics of home biased fund managers show that the perceived informational advantage does not need to be valid. Multivariate analyses indicate home bias being related to relative return optimism, overconfidence, higher age, lower bonus and less experience. Therefore, behavioural determinants contribute usefully towards an explanation of the home bias puzzle. Copyright © 2007 John Wiley & Sons, Ltd.