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What Drives Home Bias? Evidence from Fund Managers Views

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  • Lütje, Torben
  • Menkhoff, Lukas

Abstract

A survey of fund managers reveals home bias for these sophisticated investors in an unrestricted setting. Proximity, perceived informational advantage and higher expected returns are confirmed as accompanying factors. In addition, the home bias of equity managers is also related to institutional, informational and behavioral characteristics. The perceived informational advantage does not seem to be valid. Multivariate analyses indicate that home bias is mainly related to relative return optimism, non-fundamental information and peculiar behavior towards risk. We interpret these as characteristics of less than fully rational behavior. It is consistently found that this pattern does not apply to bond managers.

Suggested Citation

  • Lütje, Torben & Menkhoff, Lukas, 2004. "What Drives Home Bias? Evidence from Fund Managers Views," Hannover Economic Papers (HEP) dp-296, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-296
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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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