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What Drives Home Bias? Evidence from Fund Managers Views

Listed author(s):
  • Lütje, Torben
  • Menkhoff, Lukas

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.

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File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-296.pdf
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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-296.

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Length: 24 pages
Date of creation: May 2004
Handle: RePEc:han:dpaper:dp-296
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