Authors: Taylan Mavruk
Addresses: School of Business, Economics and Law, Goteborg University, Vasagatan 1, Box 600, SE 405 30 Sweden
Abstract: Using data on direct investments of individual investors from 2000 to 2008, this paper shows that investors are persistent in holding local stocks even though they do not earn abnormal return on local biased investments. This preference might be explained by familiarity hypothesis, hedging needs against human capital, passiveness of investors, or indisputable preference of investors. The paper also shows that the individual portfolios with large firms, established firms, highly levered firms, and firms with a dividend payout include more local investments. Finally, females exhibit stronger local bias than males do.
Keywords: individual investors; local bias; state dependence; familiarity; risk adjustment; portfolio returns; cohort analysis; direct investment; local investments; gender.
International Journal of Banking, Accounting and Finance, 2011 Vol.3 No.1, pp.91 - 113
Published online: 31 Mar 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article