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Patriotism in your portfolio

  • Morse, Adair
  • Shive, Sophie
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    More patriotic countries have greater home bias in their equity selection. In a panel of World Values Surveys covering 53 countries, measures of patriotism are positively related to home bias measures after controlling for transaction barriers, diversification benefits, information, and familiarity. Within-country changes in patriotism vary with changes in the home bias. The results are robust to using ISSP measures of patriotism covering 24 countries and within-U.S. data from the Survey of Consumer Finances. Instrumenting patriotism with social variables uncorrelated with economic and political factors confirms that patriotism affects investment. The average country invests $18 to $30 billion more abroad (a 3% to 5% increase) with a one standard deviation drop in patriotism.

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    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 14 (2011)
    Issue (Month): 2 (May)
    Pages: 411-440

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    Handle: RePEc:eee:finmar:v:14:y:2011:i:2:p:411-440
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