{"title":"Beliefs and the equity home bias","authors":"Xinxin Zhu , Peiran Jiao , Jichuan Zong","doi":"10.1016/j.econlet.2024.111983","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate the belief-based mechanism that potentially drives the equity home bias puzzle using a novel experimental design. We find that geographical information causally shapes investor beliefs, leading to a home bias effect in beliefs. Participants expect higher returns and lower risk from local stocks compared to non-local ones. Loss probability strongly predicts risk perception, but its effect weakens when the stock is local. Yet, we do not find a home bias in investment choices.</p></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"244 ","pages":"Article 111983"},"PeriodicalIF":2.1000,"publicationDate":"2024-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economics Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165176524004671","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
We investigate the belief-based mechanism that potentially drives the equity home bias puzzle using a novel experimental design. We find that geographical information causally shapes investor beliefs, leading to a home bias effect in beliefs. Participants expect higher returns and lower risk from local stocks compared to non-local ones. Loss probability strongly predicts risk perception, but its effect weakens when the stock is local. Yet, we do not find a home bias in investment choices.
期刊介绍：
Many economists today are concerned by the proliferation of journals and the concomitant labyrinth of research to be conquered in order to reach the specific information they require. To combat this tendency, Economics Letters has been conceived and designed outside the realm of the traditional economics journal. As a Letters Journal, it consists of concise communications (letters) that provide a means of rapid and efficient dissemination of new results, models and methods in all fields of economic research.
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