Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/239182 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 13 [Issue:] 5 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
Observed international diversification implies an investment home bias (IHB). Can bivariate preferences with a local domestic peer group rationalize the IHB? For example, it is argued that wishing to have a large correlation with the Standard and Poor's 500 stock index (S&P 500 stock index) may induce an increase in the domestic investment weight by American investors and, hence, rationalize the IHB. While this argument is valid in the mean-variance framework, employing bivariate first-degree stochastic dominance (BFSD), we prove that this intuition is generally invalid. Counter intuitively, employing "keeping up with the Joneses" (KUJ) preference with actual international data even enhances the IHB phenomenon.
Subjects: 
investment home bias (IHB)
bivariate first-degree stochastic dominance (BFSD)
keeping up with the Joneses (KUJ)
correlation loving (CL)
JEL: 
D81
C91
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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