Individual Investors’ Portfolio Choice and Birthplace Bias Evidence from portfolios of European investors – the case of Sweden

• Geographical proximity bias of investors is a widely studied phenomenon. In previous research, the main focus has been on the distortion of US portfolios. The empirical evidence from Europe is rather limited. Using Swedish data, this paper examines whether the geographical proximity bias of individual investors stems from information asymmetry or behavioral factors. We introduce the concept of ‘birthplace bias’ and find that the proximity bias is strongest for investors who have never moved away from the area in which they were born. The bias is stronger the longer the investor has lived in the same geographical area. However, neither local bias nor birthplace bias demonstrates an advantage in terms of abnormal portfolio return. This result implies that proximity bias is not driven by information asymmetry, which may have policy implications with regard to the confidence in financial markets.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Nyckelord

birthplace bias

local bias

individual investors

information asymmetry.

Publikations- och innehållstyp

vet (ämneskategori)

kon (ämneskategori)