A return-based approach to identify home bias of European equity funds

Maier M, Scholz H (2018)

Publication Language: English

Publication Type: Journal article

Publication year: 2018


Book Volume: 24

Pages Range: 1288-1310

Journal Issue: 15

URI: https://www.tandfonline.com/doi/abs/10.1080/1351847X.2017.1415946

DOI: 10.1080/1351847X.2017.1415946


This paper introduces a return-based approach to studying a possible home bias of European equity funds by estimating their exposures to their domestic markets. We first confirm the robustness of our approach using simulated portfolios with different proportions of domestic and foreign stocks. The empirical analysis examines equity funds domiciled in 15 European countries that invest in European stocks. We examine individual funds as well as portfolios comprising funds that are all domiciled in a particular country. Our findings reveal that the portfolios of four domiciles show a significant home bias. Moreover, we observe that in seven domiciles more than a quarter of the individual funds are home-biased. These results are robust when controlling for fund-specific benchmarks or for the average country exposures of all funds in our final sample. Finally, a home bias of individual funds is not related to superior performance, but actually results in higher investment risk consistent with underdiversification.


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How to cite


Maier, M., & Scholz, H. (2018). A return-based approach to identify home bias of European equity funds. European Journal of Finance, 24(15), 1288-1310. https://doi.org/10.1080/1351847X.2017.1415946


Maier, Moritz, and Hendrik Scholz. "A return-based approach to identify home bias of European equity funds." European Journal of Finance 24.15 (2018): 1288-1310.

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