An analysis of the home bias phenomenon in securities holdings of developed and emerging countries

Abstract

Several studies and financial theories all have documented the benefits of international investment. Despite this fact, many investment portfolios continue to be heavily focused in their domestic market (Cooper et al., 1994). This study focuses on both equity and debt home bias, by studying the significance of four main factors: Trade to GDP, availability of information, the crisis effect and number of sectors within an economy. Nine countries, representing both emerging and developed countries are studied in this dissertation. The empirical analysis yields interesting insights; with little to no correlation between the factors and the countries studied, leading the author to conclude that factors leading to home bias might differ from one country to another.