Arbeitspapier
The role of uncertainty avoidance in foreign investment bias
In this paper, I explore the determinants of foreign bias in international portfolio investment focusing on a behavioral explanation. Specifically, I investigate whether investors having a stronger uncertainty aversion perceive a foreign country to be more unfamiliar than those with less such aversion. I exploit systematic differences in uncertainty avoidance across countries in my analysis using Hofstede's (1980, 2001) findings for this purpose. I show that less familiarity with the foreign markets discourages investors from investing abroad and that this effect is more pronounced the more uncertainty averse the investor, even after controlling for different sources of risk. I provide compelling evidence that uncertainty avoidance helps to explain foreign bias and that it has an amplifying effect on unfamiliarity and should be accounted for when modeling portfolio choices.
- Sprache
-
Englisch
- Erschienen in
-
Series: Research Papers in Economics ; No. 15/14
- Klassifikation
-
Wirtschaft
International Finance: General
Portfolio Choice; Investment Decisions
International Financial Markets
Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
- Thema
-
foreign bias
home bias
international portfolio investment
uncertainty avoidance
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Erdogan, Burcu
- Ereignis
-
Veröffentlichung
- (wer)
-
Universität Trier, Fachbereich IV – Volkswirtschaftslehre
- (wo)
-
Trier
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Erdogan, Burcu
- Universität Trier, Fachbereich IV – Volkswirtschaftslehre
Entstanden
- 2014
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