A return-based approach to identify home bias of European equity funds

Moritz Maier and Hendrik Scholz

The European Journal of Finance, 2018, vol. 24, issue 15, 1288-1310

Abstract: This paper introduces a return-based approach to studying a possible home bias of European equity funds by estimating their exposures to their domestic markets. We first confirm the robustness of our approach using simulated portfolios with different proportions of domestic and foreign stocks. The empirical analysis examines equity funds domiciled in 15 European countries that invest in European stocks. We examine individual funds as well as portfolios comprising funds that are all domiciled in a particular country. Our findings reveal that the portfolios of four domiciles show a significant home bias. Moreover, we observe that in seven domiciles more than a quarter of the individual funds are home-biased. These results are robust when controlling for fund-specific benchmarks or for the average country exposures of all funds in our final sample. Finally, a home bias of individual funds is not related to superior performance, but actually results in higher investment risk consistent with underdiversification.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1351847X.2017.1415946 (text/html)
Access to full text is restricted to subscribers.

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:taf:eurjfi:v:24:y:2018:i:15:p:1288-1310

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/1351847X.2017.1415946

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().