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Patriotism in your portfolio

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  • Morse, Adair
  • Shive, Sophie

Abstract

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.

Suggested Citation

  • Morse, Adair & Shive, Sophie, 2011. "Patriotism in your portfolio," Journal of Financial Markets, Elsevier, vol. 14(2), pages 411-440, May.
  • Handle: RePEc:eee:finmar:v:14:y:2011:i:2:p:411-440
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    2. Borgers, A.C.T., 2014. "Responsible investing : New insights into performance and tastes," Other publications TiSEM 587e777f-c242-4a44-968e-7, Tilburg University, School of Economics and Management.
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    7. Andreas Fuchs & Kai Gehring, 2017. "The Home Bias in Sovereign Ratings," Journal of the European Economic Association, European Economic Association, vol. 15(6), pages 1386-1423.
    8. Elina Pradkhan, 2016. "Impact of culture and patriotism on home bias in bond portfolios," Review of Managerial Science, Springer, vol. 10(2), pages 265-301, March.
    9. Alain Cohn & Ernst Fehr & Michel André Maréchal, 2017. "Do Professional Norms in the Banking Industry Favor Risk-taking?," Review of Financial Studies, Society for Financial Studies, vol. 30(11), pages 3801-3823.
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    12. Luo, Mancy, 2017. "Essays in financial intermediation and political economy," Other publications TiSEM 146f40d3-6c89-4c6d-8fea-1, Tilburg University, School of Economics and Management.
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    14. Roxana-Denisa STOENESCU & Gabriela CĂPĂȚÎNĂ, 2015. "Country-Of-Origin Effects On Purchasing Domestic Products: The Case Of Romania," CrossCultural Management Journal, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 1, pages 37-42, June.
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    24. repec:eee:soceco:v:68:y:2017:i:c:p:97-109 is not listed on IDEAS

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    Portfolio choice Home bias;

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