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Patriotism in your portfolio

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  • Morse, Adair
  • Shive, Sophie
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    Abstract

    More patriotic countries have greater home bias in their equity selection. In a panel of World Values Surveys covering 53 countries, measures of patriotism are positively related to home bias measures after controlling for transaction barriers, diversification benefits, information, and familiarity. Within-country changes in patriotism vary with changes in the home bias. The results are robust to using ISSP measures of patriotism covering 24 countries and within-U.S. data from the Survey of Consumer Finances. Instrumenting patriotism with social variables uncorrelated with economic and political factors confirms that patriotism affects investment. The average country invests $18 to $30 billion more abroad (a 3% to 5% increase) with a one standard deviation drop in patriotism.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 14 (2011)
    Issue (Month): 2 (May)
    Pages: 411-440

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    Handle: RePEc:eee:finmar:v:14:y:2011:i:2:p:411-440

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    Web page: http://www.elsevier.com/locate/finmar

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    Keywords: Portfolio choice Home bias;

    References

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    Cited by:
    1. Baltzer, Markus & Stolper, Oscar & Walter, Andreas, 2013. "Is local bias a cross-border phenomenon? Evidence from individual investors’ international asset allocation," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2823-2835.
    2. Möhlmann, Axel, 2013. "Investor home bias and sentiment about the country benefiting from the tax revenue," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 31-46.
    3. Fuchs , Andreas & Gehring , Kai, 2013. "The Home Bias in Sovereign Ratings," Working Papers 0552, University of Heidelberg, Department of Economics.
    4. Benos, Evangelos & Jochec, Marek, 2013. "Patriotic name bias and stock returns," Journal of Financial Markets, Elsevier, vol. 16(3), pages 550-570.
    5. Dennis Dlugosch & Kristian Horn & Mei Wang, 2014. "Behavioral determinants of home bias - theory and experiment," Working Papers 2014-11, Faculty of Economics and Statistics, University of Innsbruck.

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