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Is there a home field advantage in global markets?

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  • Jagannathan, Murali
  • Jiao, Wei
  • Karolyi, G. Andrew

Abstract

International equity mutual funds increasingly hire managers from countries linked to their geographic mandate. We show these funds with “home-linked managers” exhibit a strong bias to invest in stocks of the managers' home countries and attract more flows. Portfolios of stocks from countries in which a fund has a home-field advantage outperform those managed by funds without home-linked managers. We are unable to identify specific sources of an information advantage associated with the home-linked manager's performance. But an analysis of fund flows reveals a role of investor trust in home-linked managers earned primarily through past superior performance.

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  • Jagannathan, Murali & Jiao, Wei & Karolyi, G. Andrew, 2022. "Is there a home field advantage in global markets?," Journal of Financial Economics, Elsevier, vol. 143(2), pages 742-770.
    • Handle: RePEc:eee:jfinec:v:143:y:2022:i:2:p:742-770
    DOI: 10.1016/j.jfineco.2021.11.002
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    More about this item

    Keywords

    International mutual funds; Home bias; Mutual fund flows and performance; Information; Trust;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • 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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