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What Do We Know About Local Bias of Individual Investors? A Literature Review

In: HANDBOOK OF GLOBAL FINANCIAL MARKETS Transformations, Dependence, and Risk Spillovers

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  • Evren Arik
  • Ömür Süer

Abstract

This study reviews the limited academic literature on the local bias of individual investors. Local bias can be defined as the tendency of investors to invest in geographically proximate firms’ stocks, despite several advantages of diversification. Several researchers have documented the extent to which the portfolios of investors are concentrated in the local equities. Most of this research has focused on individual investors in developed countries. The research so far has put forward mainly two competing potential causes: informational advantage and familiarity.

Suggested Citation

  • Evren Arik & Ömür Süer, 2019. "What Do We Know About Local Bias of Individual Investors? A Literature Review," World Scientific Book Chapters, in: Sabri Boubaker & Duc Khuong Nguyen (ed.), HANDBOOK OF GLOBAL FINANCIAL MARKETS Transformations, Dependence, and Risk Spillovers, chapter 28, pages 743-766, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813236653_0028
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    More about this item

    Keywords

    Market Integration; Risk Management; Risk Assessment; Financial Uncertainty; Volatility; Financial Markets; Financial Development; Country Risks; Sovereign Debt Markets;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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