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Home Bias at the Fund Level

  • Harald Hau
  • Helene Rey

This paper presents new stylized facts on the distribution of the home bias at the fund level. We find (i) a large heterogeneity in the degree of home bias across mutual funds; (ii) a positive correlation between the size of funds and home bias; and (iii) a positive correlation between the size of funds, the number of foreign countries and the number of sectors in which they invest. These facts constitute a challenge for existing theories.

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File URL: http://www.nber.org/papers/w14172.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14172.

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Date of creation: Jul 2008
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Publication status: published as Harald Hau & Helene Rey, 2008. "Home Bias at the Fund Level," American Economic Review, American Economic Association, vol. 98(2), pages 333-38, May.
Handle: RePEc:nbr:nberwo:14172
Note: AP IFM
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  1. Jonathan Heathcote & Fabrizio Perri, 2013. "The International Diversification Puzzle Is Not as Bad as You Think," Journal of Political Economy, University of Chicago Press, vol. 121(6), pages 1108 - 1159.
  2. Philip R. Lane & Gian Maria Milesi-Ferretti, 2008. "International Investment Patterns," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 538-549, August.
  3. Nicolas Coeurdacier, 2006. "Do trade costs in goods market lead to home bias in equities?," 2006 Meeting Papers 111, Society for Economic Dynamics.
  4. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
  5. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
  6. Baxter, M. & Jermann, U.J., 1993. "The International Diversification Puzzle is Worse than you Think," RCER Working Papers 350, University of Rochester - Center for Economic Research (RCER).
  7. Maurice Obstfeld & Kenneth Rogoff, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Working Papers 7777, National Bureau of Economic Research, Inc.
  8. Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
  9. Harald Hau & Hélène Rey, 2008. "Global Portfolio Rebalancing Under the Microscope," NBER Working Papers 14165, National Bureau of Economic Research, Inc.
  10. Bottazzi, Laura & Pesenti, Paolo & van Wincoop, Eric, 1996. "Wages, profits and the international portfolio puzzle," European Economic Review, Elsevier, vol. 40(2), pages 219-254, February.
  11. Mondria, Jordi & Wu, Thomas, 2010. "The puzzling evolution of the home bias, information processing and financial openness," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 875-896, May.
  12. Akito Matsumoto & Charles Engel, 2005. "Portfolio Choice in a Monetary Open-Economy DSGE Model," IMF Working Papers 05/165, International Monetary Fund.
  13. Harald Hau & Hélène Rey, 2006. "Exchange Rates, Equity Prices, and Capital Flows," Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 273-317.
  14. Kalok Chan & Vicentiu Covrig & Lilian Ng, 2005. "What Determines the Domestic Bias and Foreign Bias? Evidence from Mutual Fund Equity Allocations Worldwide," Journal of Finance, American Finance Association, vol. 60(3), pages 1495-1534, 06.
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