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“Home Bias Puzzle”. Is It a Puzzle or Not?

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  • Constantinos Gavriilidis

    ()

Abstract

The benefits of international diversification have been well documented over the last decades. Despite this however, investors seem unwilling to exploit this opportunity in order to limit the risk of their portfolio and they continue to invest the largest percentage of their wealth in domestic assets. This phenomenon is called the Home Bias Puzzle and the given explanations for it have not been empirically proven to justify its existence. The purpose of this paper is to present a literature review on the opinions and possible explanations about the home bias puzzle. Furthermore, concluding, it will try to answer whether the home bias puzzle is a puzzle or not.

Suggested Citation

  • Constantinos Gavriilidis, 2010. "“Home Bias Puzzle”. Is It a Puzzle or Not?," Economic Analysis, Institute of Economic Sciences, vol. 43(3-4), pages 7-14.
  • Handle: RePEc:ibg:eajour:v:43:y:2010:i:3-4:p:7-14
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    File URL: http://www.ien.bg.ac.rs/index.php/en/2010/2010-3-4
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    References listed on IDEAS

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    1. Steven G. Rivkin & Eric A. Hanushek & John F. Kain, 2005. "Teachers, Schools, and Academic Achievement," Econometrica, Econometric Society, vol. 73(2), pages 417-458, March.
    2. Schneider, Andrea, 2010. "Redistributive taxation vs. education subsidies: Fostering equality and social mobility in an intergenerational model," Economics of Education Review, Elsevier, vol. 29(4), pages 597-605, August.
    3. Hoyt, William H. & Lee, Kangoh, 1998. "Educational vouchers, welfare effects, and voting," Journal of Public Economics, Elsevier, vol. 69(2), pages 211-228, June.
    4. McMillan, Robert, 2004. "Competition, incentives, and public school productivity," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1871-1892, August.
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    More about this item

    Keywords

    Home bias puzzle; international finance;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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