Home advantage: The preference for local residential real estate investment

Danika Wright and María B. Yanotti

Pacific-Basin Finance Journal, 2019, vol. 57, issue C

Abstract: Do residential real estate investors hold locally-concentrated or geographically-diversified portfolios? We identify a large sample of investors in the residential property market and measure the proximity of their investment properties to their owner-occupied address to study this question. We hypothesize that there is a preference among residential real estate investors to buy locally and find strong empirical support for this. This preference is in line with the results of ‘home bias’ research in other investment markets, yet contrasts with the documented benefits of geographic diversification in real estate markets. Our results indicate that the home bias may be partly mitigated by investor sophistication and is not driven by the relative purchasing power across geographic areas.

Keywords: Housing investors; Home bias; Anchoring; Information asymmetry (search for similar items in EconPapers)
JEL-codes: R31 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19300630

DOI: 10.1016/j.pacfin.2019.06.014

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