Familiarity Breeds Investment

Gur Huberman

The Review of Financial Studies, 2001, vol. 14, issue 3, 659-80

Abstract: Shareholders of a Regional Bell Operating Company (RBOC) tend to live in the area which it serves, and an RBOC's customers tend to hold its shares rather than other RBOCs' equity. The geographic bias of the RBOC investors is closely related to the general tendency of households' portfolios to be concentrated, of employees' tendency to own their employers' stocks in their retirement accounts, and to the home country bias in the international arena. Together, these phenomena provide compelling evidence that people invest in the familiar while often ignoring the principles of portfolio theory. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Date: 2001
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The Review of Financial Studies is currently edited by Itay Goldstein

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