Understanding the Equity Home Bias: Evidence from Survey Data

Abstract

This study uses survey data of fund managers' views on prospects for international equity markets to shed light on why investment portfolios are significantly biased towards domestic equities. We find that fund managers from the United States, the United Kingdom, continental Europe, and Japan show a significant relative optimism towards their home equity market. Where institutional factors have largely failed to explain the puzzle, our evidence lends support to behavioral explanations of the bias.