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Home bias: taking comfort in what you know?

Author

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  • Lucy F. Ackert
  • Bryan K. Church

Abstract

Research suggests that informational differences, including familiarity with domestic securities, underlie home equity bias. We suggest that home bias can arise more subtly. The bias may simply occur because individuals are more comfortable with domestic companies, irrespective of information or knowledge differences. Using an experimental method, we find that individuals prefer domestic equity opportunities – as a default strategy. Individuals do not invest more because they are overly optimistic about the performance of domestic securities. When objective, historical information is made available on the set of investment opportunities, expectations adjust accordingly and individuals more readily invest in international securities.

Suggested Citation

  • Lucy F. Ackert & Bryan K. Church, 2009. "Home bias: taking comfort in what you know?," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(2), pages 152-166.
    • Handle: RePEc:ids:ijbeaf:v:1:y:2009:i:2:p:152-166
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    Cited by:

    1. Aspara, Jaakko & Chakravarti, Amitav, 2015. "Investors’ reactions to company advertisements: the persuasive effect of product-featuring ads," LSE Research Online Documents on Economics 64130, London School of Economics and Political Science, LSE Library.

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