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Home Bias and Ambiguity Aversion

In: Cultural Finance A World Map of Risk, Time and Money

Author

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  • Thorsten Hens
  • Marc Oliver Rieger
  • Mei Wang

Abstract

Despite the well-known benefits of international diversification and global market integration, most investors still allocate proportionally too much domestic assets and too little foreign assets in their portfolio (French and Poterba, 1991). Various explanations have been proposed to explain this so-called home bias puzzle, including rational justifications such as differences in corporate governance and investor protection (Dahlquist et al., 2003), informational advantages (Brennan and Cao, 1997; Grinblatt and Keloharju, 2001) hedging domestic inflation (Cooper and Kaplanis, 1994), as well as less rational reasons such as familiarity biases (Huberman, 2001), patriotism (Morse and Shive, 2011) and overoptimism (French and Poterba, 1991; Weber et al., 2005)…

Suggested Citation

  • Thorsten Hens & Marc Oliver Rieger & Mei Wang, 2020. "Home Bias and Ambiguity Aversion," World Scientific Book Chapters, in: Cultural Finance A World Map of Risk, Time and Money, chapter 19, pages 507-509, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811221958_0019
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    More about this item

    Keywords

    Finance; Culture; International; Time Preferences; Risk Preferences; Decision Theory;
    All these keywords.

    JEL classification:

    • Z1 - Other Special Topics - - Cultural Economics
    • G4 - Financial Economics - - Behavioral Finance
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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