Keeping Up with the Joneses and the Home Bias
نویسنده
چکیده
We argue that when individuals care about their consumption relative to that of their neighbors, a home bias emerges, that is investors overweight domestic stocks in their portfolios. Domestic stocks are preferred because they also serve the objective of mimicking the economic fortunes and welfare of the investor’s neighbors, countrymen, and social reference group. We also demonstrate that globalization mitigates the home bias, and derive a modified International CAPM. * Corresponding Author: School of Business Administration, Bar Ilan University, Ramat Gan 52900, ISRAEL. Fax: 972-3-5353182; E-mail: [email protected] ** Davidson School of IE & Management, Technion – Israel Institute of Technology, Haifa 32000, ISRAEL. E-mail: [email protected] We have benefited from presentation at the 2003 European Financial Management Association Meetings in Helsinki, and particularly from the comments of Yakov Amihud and Ian Cooper. All remaining errors are our own.
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