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Home bias and local equity portfolio decisions of Chinese insurance institutional investors

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  • Shanshan Yang
  • Na He
  • Haizong Yu

Abstract

Our paper explores whether Chinese insurance companies exhibit a local preference in deciding their equity portfolios and the incentive of this preference. Our research finds that Chinese insurance institutional investors significantly tilt to invest in local firms geographically close to them, and local investments do not significantly outperform non-local investments. The results indicate that the behavioral aspect of home bias, rather than information advantage, play a more significant role in deciding equity holdings of China’s insurance companies. Additionally, local equity preference is more pronounced in dialect-segmented areas and life insurance firms. This paper incorporates hometown identification into the analysis framework of insurance companies’ portfolio decision-making and enriches the research of their investing strategies from the perspective of behavioral finance.

Suggested Citation

  • Shanshan Yang & Na He & Haizong Yu, 2023. "Home bias and local equity portfolio decisions of Chinese insurance institutional investors," PLOS ONE, Public Library of Science, vol. 18(7), pages 1-17, July.
    • Handle: RePEc:plo:pone00:0288250
    DOI: 10.1371/journal.pone.0288250
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    References listed on IDEAS

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    3. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-226, May.
    4. Mark S. Seasholes & Ning Zhu, 2010. "Individual Investors and Local Bias," Journal of Finance, American Finance Association, vol. 65(5), pages 1987-2010, October.
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