International portfolio diversification: a comparison of individual investors in Austria and Mexico

Investors tend to overweigh domestic stocks in their portfolios. This insufficient diversification negatively impacts their performance and harms investors. The present paper investigates differences in the approach to international diversification between individual investors from Austria and Mexico. Comparing investors from these two countries offers further insights concerning the observable gap in international diversification between developed and emerging economies. A survey among individual investors from Austria and Mexico was conducted. The survey results show that retail investors from both countries express significant levels of home bias, with Austrian investors expressing a higher affinity for international diversification in general and Mexican investors expressing a higher preference for domestic stocks. These findings underline the complex nature of the puzzle, showing once more that investors express a deeply rooted home bias in their investment decisions. The results emphasise the need for adequate financial education to highlight the advantages of international portfolio diversification.