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Title:Home-field advantage or a matter of ambiguity aversion? Local bias among German individual investors PDF Logo
Authors:Baltzer, Markus
Stolper, Oscar
Walter, Andreas
Issue Date:2011
Series/Report no.:Discussion Paper Series 1: Economic Studies 2011,23
Abstract:We analyze the effect of geographic proximity on individual investors' portfolio choice. Using a unique data set which covers the common stockholdings of private households at regional banks in Germany, we document strong and consistent overinvestment in geographically close companies. Our results conclusively reject the presence of an informational advantage ('home-field advantage') of local over non-local investors. Instead, households' preference for local equity turns out to be familiarity-driven. We conclude that individual investors' local bias is induced by ambiguity aversion in the portfolio selection process rather than a trading strategy based on superior information about local companies.
Subjects:local bias
portfolio diversification
household finance
investor behaviour
ambiguity aversion
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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