The home bias and the local bias: A survey

Eduard Gaar (), David Scherer and Dirk Schiereck
Additional contact information
Eduard Gaar: Technical University of Darmstadt
David Scherer: Technical University of Darmstadt
Dirk Schiereck: Technical University of Darmstadt

Management Review Quarterly, 2022, vol. 72, issue 1, No 2, 57 pages

Abstract: Abstract The home bias like the disposition effect is a well-researched economic phenomenon in investor behaviour which has been examined in finance journal articles for decades. While there is little doubt about the existence of the bias, its magnitude varies across countries and investor groups. The home bias has to be regarded as a multifactorial phenomenon, a combination of numerous causes which all synergistically contribute. In contrast to other biases the home bias can at least partially be explained by reasons beyond irrational investor behaviour. While institutional restrictions play a minor role, informational asymmetries and superior information of domestic investors are important factors. Thus, the performance of investments may well benefit from a home bias, and the bias then no longer would be a puzzle but rather rational behaviour as a lower diversification level may lead to higher returns. The contemporary understanding of the home bias gains in relevance as the ongoing political debate in Germany has to clarify an institutional framework for long-run retirement savings plans of private households based on equity investments.

Keywords: Home bias; Local bias; Domestic bias; Behavioural bias; Market imperfections (search for similar items in EconPapers)
JEL-codes: D14 D91 E71 G11 G12 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://link.springer.com/10.1007/s11301-020-00203-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:manrev:v:72:y:2022:i:1:d:10.1007_s11301-020-00203-8

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/11301

DOI: 10.1007/s11301-020-00203-8

Access Statistics for this article

Management Review Quarterly is currently edited by Thomas Reutterer, Jonas F. Puck, Engelbert Dockner and Anne d'Arcy

More articles in Management Review Quarterly from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().