Home Bias and Ambiguity Aversion

Thorsten Hens, Marc Oliver Rieger and Mei Wang

Chapter 19 in Cultural Finance:A World Map of Risk, Time and Money, 2020, pp 507-509 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Despite the well-known benefits of international diversification and global market integration, most investors still allocate proportionally too much domestic assets and too little foreign assets in their portfolio (French and Poterba, 1991). Various explanations have been proposed to explain this so-called home bias puzzle, including rational justifications such as differences in corporate governance and investor protection (Dahlquist et al., 2003), informational advantages (Brennan and Cao, 1997; Grinblatt and Keloharju, 2001) hedging domestic inflation (Cooper and Kaplanis, 1994), as well as less rational reasons such as familiarity biases (Huberman, 2001), patriotism (Morse and Shive, 2011) and overoptimism (French and Poterba, 1991; Weber et al., 2005)…

Keywords: Finance; Culture; International; Time Preferences; Risk Preferences; Decision Theory (search for similar items in EconPapers)
JEL-codes: D9 E7 G4 Z1 (search for similar items in EconPapers)
Date: 2020
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