The home-institution bias

Grant McQueen and Anders Stenkrona

Journal of Banking & Finance, 2012, vol. 36, issue 6, 1627-1638

Abstract: We document a new investor preference we call the home-institution bias. Whereas the home-asset bias is a preference for domestic assets, the home-institution bias is a preference for domestic financial institutions. Our data come from Sweden’s government-mandated retirement system. In cross-fund regressions, we find that funds offered by Swedish institutions received around 10 times more money than similar funds offered by foreign institutions. We show that this preference for home institutions is distinct from the home-asset preference, is not driven by information asymmetries, and is consistent with an underlying preference by individuals to deal with the familiar. Cross-individual regressions also support a behavioral explanation because the home-institution bias is strongest among financially-unsophisticated and provincial investors.

Keywords: Home bias; Institution bias; Mutual fund; Familiarity; Sweden (search for similar items in EconPapers)
JEL-codes: G02 G11 G14 G23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:6:p:1627-1638

DOI: 10.1016/j.jbankfin.2012.01.011

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