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Do global equity mutual funds exhibit home bias?

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  • Hiraki, Takato
  • Liu, Ming

Abstract

We study a sample of U.S. global equity mutual funds that invest in markets around the world. While the existing literature shows significant home bias among investors, we find that U.S. global funds on average do not exhibit home bias but with cross-fund variation. Fund manager teams with more foreign educational background, younger fund managers, and those with MBA degrees tend to invest more in international markets. When sorting funds into deciles by the level of home bias, we find that both home- and foreign-biased funds tend to outperform medium decile funds and hold concentrated portfolios, supporting the information hypothesis for home and foreign bias. Further, the well-performing foreign-biased funds are much larger than other funds, indicating that there are no decreasing returns to scale among global equity mutual funds.

Suggested Citation

  • Hiraki, Takato & Liu, Ming, 2021. "Do global equity mutual funds exhibit home bias?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:beexfi:v:31:y:2021:i:c:s2214635021000526
    DOI: 10.1016/j.jbef.2021.100508
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    Cited by:

    1. Pavlo Dziuba & Darya Glukhova & Kyryl Shtogrin, 2022. "Risk, Return And International Portfolio Diversification: K-Means Clustering Data," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 8(3).
    2. Artur A. Trzebiński, 2022. "Assessing the performance of mutual funds with multifactor asset pricing models," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 79-106.
    3. 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.
    4. Fleta-Asín, Jorge & Muñoz, Fernando, 2023. "Institutional distance and US-based international mutual funds’ financial performance," Finance Research Letters, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Home bias; Global equity mutual funds;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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