Home country bias: Does domestic experience help investors enter foreign markets?
Margarida Abreu (),
Victor Mendes and
Joao Santos
Journal of Banking & Finance, 2011, vol. 35, issue 9, 2330-2340
Abstract:
This paper investigates the dynamics of individuals' investments leading up to their decision to make the first investment abroad. We show that investors first invest in domestic securities and only some time later they invest abroad in foreign securities. We also show that investors who trade more often in the domestic market start to invest abroad earlier. Our findings suggest that the experience investors acquire while they trade in the domestic market is a key reason why active investors enter the foreign market earlier. A reason is that highly educated investors as well as investors with more financial knowledge, arguably those for whom learning by trading is the least important, do not need to trade as much in the domestic market before they start investing in foreign securities. Another reason is that investors who start investing in foreign securities are able to improve on their performance afterwards. This improvement in performance constitutes further evidence that the home country bias is costly.
Keywords: Learning; Home; country; bias; Duration; analysis (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426611000537
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Home Country Bias: Does Domestic Experience Help Investors Enter Foreign Markets? (2010) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:9:p:2330-2340
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().