Home bias among institutional investors: a study of the economist quarterly portfolio poll

Abstract

This paper studies the equity home bias puzzle by examining international portfolios recommended by institutional investors. These recommended portfo- lios from the Economist quarterly poll allow us to isolate the role of information asymmetry in international portfolio investments. The results show that home bias is observed both in the level of portfolio holdings and in the frequency of portfolio adjustments. Specifically, institutions recommend their home markets more than they do foreign markets and they change their home market weights more frequently than they do foreign market weights. The evidence in this study is consistent with the information asymmetry story of home bias.