IDEAS home Printed from https://ideas.repec.org/a/bla/jecsur/v33y2019i3p949-967.html
   My bibliography  Save this article

Equity Home Bias: A Review Essay

Author

Listed:
  • Kavous Ardalan

Abstract

This paper reviews the relatively more recent literature on equity home bias – the empirical finding that people overinvest in domestic stocks relative to the optimal investment portfolio implied by the modern portfolio theory. It reviews six broad classes of explanation of this puzzling phenomenon: (1) hedging home risks; (2) barriers to foreign investments; (3) information asymmetries; and (4) behavioral factors. The consensus is that none of the explanations can account for the full extent of the bias by itself, thus the home bias should be explained by a combination of rational and behavioral factors.

Suggested Citation

  • Kavous Ardalan, 2019. "Equity Home Bias: A Review Essay," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 949-967, July.
    • Handle: RePEc:bla:jecsur:v:33:y:2019:i:3:p:949-967
    DOI: 10.1111/joes.12302
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joes.12302
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joes.12302?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Malmendier, Ulrike & Pouzo, Demian & Vanasco, Victoria, 2020. "Investor experiences and international capital flows," Journal of International Economics, Elsevier, vol. 124(C).
    2. Dlugosch, Dennis & Horn, Kristian & Wang, Mei, 2023. "New experimental evidence on the relationship between home bias, ambiguity aversion and familiarity heuristics," Journal of Economics and Business, Elsevier, vol. 125.
    3. Fujiwara, Kenji, 2021. "Strategic investment and industry location in a footloose capital model of economic geography," Economics Letters, Elsevier, vol. 203(C).
    4. Chung, Chune Young & Sul, Hong Kee & Wang, Kainan, 2021. "A tale of two forms of proximity: Geography and market," Journal of Business Research, Elsevier, vol. 122(C), pages 14-23.
    5. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    6. Giuseppe Pulina & Skerdilajda Zanaj, 2022. "Tax competition and phantom FDI," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1342-1363, December.
    7. Eduard Gaar & David Scherer & Dirk Schiereck, 2022. "The home bias and the local bias: A survey," Management Review Quarterly, Springer, vol. 72(1), pages 21-57, February.
    8. R. Balasubramanian & Brajesh Kumar, 2023. "Equity Home Bias in Emerging and Advanced Economies: Trend Before and During COVID-19," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(4), pages 261-275, November.
    9. Curatola, Giuliano & Dergunov, Ilya, 2023. "International capital markets with interdependent preferences: Theory and empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 403-421.
    10. Do, Hung X. & Nguyen, Nhut H. & Nguyen, Quan M.P., 2022. "Multinationals and stock return comovement," Global Finance Journal, Elsevier, vol. 52(C).
    11. Wang, Weishen, 2020. "Shanghai-Hong Kong Stock Exchange Connect Program: A story of two markets and different groups of stocks," Journal of Multinational Financial Management, Elsevier, vol. 55(C).
    12. Junyong Lee & Kyounghun Lee & Frederick Dongchuhl Oh, 2023. "Religion and Equity Home Bias," Open Economies Review, Springer, vol. 34(5), pages 1015-1038, November.
    13. McDowell, Shaun & Lee, John B. & Marsden, Alastair, 2020. "The potential effect of taxes on the equity home bias in New Zealand PIEs," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    14. Galvani, Valentina, 2022. "Country-Based Investing with Exchange Rate and Reserve Currency," Working Papers 2022-5, University of Alberta, Department of Economics.
    15. Drobetz, Wolfgang & Mönkemeyer, Marwin & Requejo, Ignacio & Schröder, Henning, 2023. "Foreign bias in institutional portfolio allocation: The role of social trust," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 233-269.
    16. Socaciu, Erzsébet-Mirjám & Nagy, Bálint-Zsolt & Benedek, Botond, 2023. "No place like home: Home bias and flight-to-quality in Group of Seven countries," Economic Modelling, Elsevier, vol. 129(C).
    17. Mohammed Bouaddi & Khouzeima Moutanabbir, 2022. "Systematic extreme potential gain and loss spillover across countries," Risk Management, Palgrave Macmillan, vol. 24(4), pages 327-366, December.
    18. Lee, Junyong & Lee, Kyounghun & Oh, Frederick Dongchuhl, 2023. "International portfolio diversification and the home bias puzzle," Research in International Business and Finance, Elsevier, vol. 64(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jecsur:v:33:y:2019:i:3:p:949-967. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.