The Equity Home Bias: Contrasting An Institutional With A Behavioral Explanation
AbstractAn empirically well-established finding is that equity portfolios are concentrated in the domestic equity market of the investor. Previous theoretical and empirical analyses have mainly focused on institutional explanations and largely neglected individual behavior. In this study we report the results of an experiment in which we contrast institutional with behavioral explanations by comparing asymmetric information to social identity. Our results show that social forces, triggered by group a_liation, drive underdiversified and domestically biased portfolio allocations. Moreover, social identity explains the observed behavior equally well as asymmetric information. We also find that individuals are spuriously more optimistic toward the performance of domestic firms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2003-03.
Length: 34 pages
Date of creation:
Date of revision:
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- F30 - International Economics - - International Finance - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-10 (All new papers)
- NEP-CBE-2003-03-10 (Cognitive & Behavioural Economics)
- NEP-CFN-2003-03-10 (Corporate Finance)
- NEP-PKE-2003-03-10 (Post Keynesian Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2008.
"Belief Elicitation in Experiments: Is there a Hedging Problem?,"
IZA Discussion Papers
3517, Institute for the Study of Labor (IZA).
- Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer, vol. 13(4), pages 412-438, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karin Richter).
If references are entirely missing, you can add them using this form.