'Near-Home Bias' in Foreign Direct Investments

Muradoğlu, Yaz Gűlnur; Levis, Mario; Vasileva, Kristina

doi:10.2139/ssrn.1359168

Cited by 2 publications

(1 citation statement)

References 44 publications

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“…M. Lin defines this phenomenon as «suboptimal behaviour in making investment decisions, which leads to economic inefficiency in the market» [4]. M. Levis, in turn, gives the following definition: «the tendency for investors to rely on investments in local markets, without making full use of international diversification» [5]. In our opinion, any of the suggested definitions reflects the essence of a particular deviation.…”

Section: Abstract the Comparative Analysis Of The Main Approaches Tomentioning

confidence: 99%

Home Bias as a Key Behavioral Deviation of Portfolio Investors Decisions

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Shtogrin

2020

APIR

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The comparative analysis of the main approaches to the reasons for the home bias is explored. The main factors of home bias are identified. The reasons for the existence of home bias are determined on the basis of systematization of the existing discourse. The main stages of the evolution of approaches to determining the reasons for home bias are identified. It was found that the most promising approach is the behaviourist approach, as well as the institutional approach and the transaction costs approach. The historical and current dynamics of the home bias in the investment portfolios of different countries is studied. A comparative analysis of the home bias for different groups of countries according to their level of economic development is carried out. It was found that developed countries have the lowest share of local market assets in the portfolio. The evolution of approaches to the home bias has been studied. The main scientific publications on the issue of home bias in the historical perspective are analysed and systematized. The main quantitative dimensions of the expression of home bias are highlighted. The main forms of quantitative expression of home bias, which received relative expression in the form of indices, are studied. The qualitative and quantitative composition of modern investment portfolios of the countries with the largest shares in the world market capitalization is studied and analysed. It has been found that there are countries with traditionally low and high levels of international diversification, such as China and Luxembourg, respectively.

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Section: Abstract the Comparative Analysis Of The Main Approaches Tomentioning

confidence: 99%

Home Bias as a Key Behavioral Deviation of Portfolio Investors Decisions

Дзюба

Shtogrin

2020

APIR

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Behavioral Biases in Investment Decisions: Home Bias Case

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Shtogrin

2021

Herald UNU. International Economic Relations and World Economy

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The place of home bias in the modern paradigm of international portfolio investing is determined. The differences between theory and practice of international portfolio investing resulting from such a bias are identified. Main advantages of international diversification of investment portfolios in terms of performance-risk ratio are defined. It is determined that the growing level of financial markets globalization accompanied by the increase in correlation of returns of financial assets have not affected the benefits of international diversification. The primary problems in determining the reasons for home bias are identified. The main economic and mathematical formalization of home bias in the form of indexes is distinguished. The local bias is investigated. It is revealed that local bias is not limited to national borders. It is determined that home bias is negatively correlated with the wealth of an investor. The extent of home bias for particular groups of countries according to their level of economic development is investigated. It is determined that the highest level of home bias is observed in several developed markets, including China, Japan, the USA, and France, while Luxembourg, the Netherlands, and Switzerland have the highest level of international diversification. The benefits of international diversification based on the MSCI indexes are determined. It is revealed that the benefits from international diversification through emerging markets are higher than those of developed markets. A comparative analysis of portfolios of several countries in the instruments of foreign and local markets is carried out. It is determined that the Great Recession of 2007-2008 promoted the increase in the level of home bias but since 2013 the global level of international diversification has been increasing. Approaches to the analysis of factors of presence of home bias are determined and their main advantages and disadvantages are analyzed based on comparative analysis. The impact of asymmetry of information, financial reporting standards, non-tradable sector of the economy, volumes of investment, inflation, transaction costs, institutional factors on the level of international diversification of the investment portfolio is investigated. A new approach to systematization of factors of home bias through their clustering for institutional, behavioral, transaction and other factors is suggested.

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'Near-Home Bias' in Foreign Direct Investments

Cited by 2 publications

References 44 publications

Home Bias as a Key Behavioral Deviation of Portfolio Investors Decisions

Home Bias as a Key Behavioral Deviation of Portfolio Investors Decisions

Behavioral Biases in Investment Decisions: Home Bias Case

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