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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/2508

Title: Home Country Bias: Does Domestic Experience Help Investors Enter Foreign Markets?
Authors: Abreu, Margarida
Mendes, Victor
Santos, João A.
Issue Date: 2010
Publisher: ISEG – Departamento de Economia
Citation: Abreu, Margarida, Victor Mendes e João A. Santos. 2010. "Home Country Bias: Does Domestic Experience Help Investors Enter Foreign Markets?". Instituto Superior de Economia e Gestão - DE Working papers nº 2-2010/DE
Series/Report no.: DE Working papers;nº 2-2010/DE
Abstract: This paper investigates whether investors' domestic experience helps them enter foreign markets. We show that investors first invest in domestic securities and only some time later they invest abroad in foreign securities. We also show that investors who trade more often in the domestic market start to invest abroad earlier. Our findings suggest that the experience investors acquire while they trade in the domestic market is a key reason why active investors enter the foreign market earlier. A reason is that highly educated investors as well as investors with more financial knowledge, arguably those for whom learning by trading is the least important, do not need to trade as much in the domestic market before they start investing in foreign securities. Another reason is that investors who start investing in foreign securities are able to improve on their performance afterwards. This improvement in performance constitutes further evidence that the home country bias is costly, thereby confirming that there are gains for investors from investing abroad.
URI: http://hdl.handle.net/10400.5/2508
ISSN: 0874-4548
Publisher version: http://aquila2.iseg.utl.pt/aquila/getFile.do?method=getFile&fileId=94304
Appears in Collections:DE - Documentos de trabalho / Working Papers

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