Non-home biased individuals’ investment choices: the role of the birthplace of investors

This paper investigates the determinants of non-home biased investment behaviour among individual investors, focusing on birthplace as an explanatory factor. Using microdata from the 2022 wave of the Bank of Italy’s Household Income and Wealth Survey, which distinguishes Italian citizens born in Italy from those born abroad but living in Italy, a two-stage Heckman selection model is implemented to explore both the likelihood of investing in foreign assets and the extent of such investments. The results show that individuals born outside Italy are significantly more likely to invest in foreign securities, underscoring the role of birthplace in reducing home bias. Furthermore, non-home bias is positively associated with higher education levels, greater financial wealth, and higher risk tolerance, while age has a slight negative effect on the proportion of investment made abroad. Interestingly, the analysis reveals a negative relationship between income class and share of foreign investments, suggesting that wealthier individuals may allocate a smaller portion of their portfolios to foreign assets, despite higher participation rates. The analysis contributes to the literature by identifying birthplace as a significant factor shaping investment decisions and extends the understanding of behavioural finance beyond traditional home bias studies. These findings have practical implications for financial advisors and regulators, helping them tailor portfolio recommendations and evaluate investor suitability based on socio-demographic and behavioural characteristics.