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Foreign Stock Investment and Sophistication of French Retail Investors

Hava Orkut

Finance, 2021, vol. 42, issue 2, 39-80

Abstract: Based on the MiFID questionnaire answers and banking records of around 7,000 retail investors, we assume that foreign investors (F-investors), who directly invest in foreign stocks, are more sophisticated than domestic investors (D-investors). After a matching, we show that stocks and warrants are more diversified in F-investors? portfolios, while mutual funds, bonds, unit-linked life insurance products and retirement plans are more diversified in those of D-investors. These sophisticated F-investors are more risk tolerant, less sensitive to losses and more financially literate, but exhibit a home bias.

Keywords: diversification; familiarity bias; home bias; MiFID questionnaire (search for similar items in EconPapers)
Date: 2021
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