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What drives home bias? Evidence from fund managers' views

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  • Torben Lütje
  • Lukas Menkhoff

    (Department of Economics, University of Hannover, Germany)

Abstract

A new survey of fund managers reveals home bias for these sophisticated investors in a setting being unrestricted by customer preferences or legal requirements. We confirm informational and behavioural determinants of home bias and find them to hold simultaneously. Further examinations of potential characteristics of home biased fund managers show that the perceived informational advantage does not need to be valid. Multivariate analyses indicate home bias being related to relative return optimism, overconfidence, higher age, lower bonus and less experience. Therefore, behavioural determinants contribute usefully towards an explanation of the home bias puzzle. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.309
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 12 (2007)
Issue (Month): 1 ()
Pages: 21-35

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Handle: RePEc:ijf:ijfiec:v:12:y:2007:i:1:p:21-35

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Citations

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Cited by:
  1. Marina Nikiforow, 2010. "Does training on behavioural finance influence fund managers' perception and behaviour?," Applied Financial Economics, Taylor & Francis Journals, vol. 20(7), pages 515-528.
  2. Lupia, Arthur & Krupnikov, Yanna & Levine, Adam Seth & Grafstrom, Cassandra & MacMillan, William & McGovern, Erin, 2008. "How “Point Blindness” Dilutes the Value of Stock Market Reports," MPRA Paper 9604, University Library of Munich, Germany.
  3. Stotz, Olaf & L\"utje, Torben & Menkhoff, Lukas & von Nitzsch, R\"udiger, 2004. "Do Fund Managers Expect Mean Averting Returns?," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-309, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Menkhoff, Lukas & Nikiforow, Marina, 2008. "Professionals' endorsement of behavioral finance: Does it impact their perception of markets and themselves?," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-392, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  5. Ni, Jinlan, 2009. "The effects of portfolio size on international equity home bias puzzle," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 469-478, June.
  6. Menkhoff, Lukas & Schmeling, Maik & Schmidt, Ulrich, 2008. "Are all professional investors sophisticated?," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-397, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  7. Diyarbakirlioglu, Erkin, 2011. "Foreign equity flows and the “Size Bias”: Evidence from an emerging stock market," Emerging Markets Review, Elsevier, vol. 12(4), pages 485-509.
  8. Mishra, Anil, 2013. "Measures of Equity Home Bias Puzzle," MPRA Paper 51223, University Library of Munich, Germany.

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