Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297364 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2924
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds domiciled in financial centers. We use a "look-through approach" to account for this misclassification. First, we find substantially smaller home bias estimates compared to those in the literature. Second, the explanatory power of plausible home bias determinants is lower than previously documented. Third, familiarity only plays a meaningful role when investors are households, highlighting the role of investor sophistication.
Subjects: 
investment funds
cross-border portfolio
home bias
financial centers
JEL: 
G11
G15
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6672-6
Document Type: 
Working Paper

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