 East or west, home is best: The birthplace bias of individual investorsTed Lindblom, Taylan Mavruk and Stefan Sjögren Journal of Banking & Finance, 2018, vol. 92, issue C, 323-339 Abstract: We examine whether there is birthplace bias in addition to local bias in the portfolio choice of individual investors. We find that, on average, individual investors who live in their birthplace invest almost three times more of their portfolio capital in local firms than other locals. A bias toward birthplace firms persists for a long time after moving elsewhere and increases significantly for “homecomers.” Our detailed analysis suggests that individual investors’ proximity bias is largely an urban phenomenon, which is explained neither by the information hypothesis nor by the familiarity hypothesis. We find that more sophisticated investors, in terms of portfolio diversification, earn, on average, abnormal portfolio returns, but they do this regardless of their portfolio distortion. Thus, attention ought to be directed toward whether individual investors are financially sophisticated rather than whether they are proximity biased. Keywords: Portfolio choice; Birthplace bias; Local bias; Counterfactual bias; Information asymmetry; Familiarity; Indisputable preferences (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:92:y:2018:i:c:p:323-339 DOI: 10.1016/j.jbankfin.2016.10.002 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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