What Do We Know About Local Bias of Individual Investors? A Literature Review

Evren Arik and Ömür Süer

Chapter 28 in Handbook of Global Financial Markets:Transformations, Dependence, and Risk Spillovers, 2019, pp 743-766 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This study reviews the limited academic literature on the local bias of individual investors. Local bias can be defined as the tendency of investors to invest in geographically proximate firms’ stocks, despite several advantages of diversification. Several researchers have documented the extent to which the portfolios of investors are concentrated in the local equities. Most of this research has focused on individual investors in developed countries. The research so far has put forward mainly two competing potential causes: informational advantage and familiarity.

Keywords: Market Integration; Risk Management; Risk Assessment; Financial Uncertainty; Volatility; Financial Markets; Financial Development; Country Risks; Sovereign Debt Markets (search for similar items in EconPapers)
JEL-codes: F37 (search for similar items in EconPapers)
Date: 2019
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