Foreign language mitigates home bias

Guy Barokas, Shai Danziger and Sivan Riff

Judgment and Decision Making, 2025, vol. 20, -

Abstract: This research examines the impact of investment language on Home Bias, investors’ tendency to prefer local over foreign assets. Across 12 rounds of incentivized investment decisions with portfolio return feedback after each round, 398 participants deciding in a foreign language exhibited no home bias, whereas those deciding in their native language did. A moderated mediation analysis further indicates that using a foreign language reduces fluency cues linked to local assets, thereby attenuating home bias. These findings extend the literature on the foreign language effect and suggest that encouraging foreign language use in investment contexts may reduce home bias and facilitate global market risk sharing.

Date: 2025
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