Turning Local: Home-bias Dynamics of Relocating Foreigners

Bjarne Florentsen, Ulf Nielsson, Peter Raahauge, Jesper Rangvid*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Using comprehensive data from Denmark, we study private investors’ preferences for domestic stocks. We compare the equity home bias of foreigners recently relocated to Denmark to the equity home bias of other investors. We find that home bias of recently relocated foreigners is lower than home bias of other investors. Our main result is that when relocated foreigners’ duration of stay increases, their home bias also increases. After 7–8 years, home bias of relocated foreigners does not differ from home bias of other investors. Our results imply that familiarity with domestic stocks develops dynamically with the length of stay in a given country. We discuss implications for explanations of the home-bias puzzle building on information asymmetries.
Original languageEnglish
JournalJournal of Empirical Finance
Volume58
Pages (from-to)436-452
Number of pages17
ISSN0927-5398
DOIs
Publication statusPublished - Sep 2020

Keywords

  • Equity home bias
  • Individual investors
  • Relocating foreigners
  • Information advantage
  • Familiarity

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