A return-based approach to identify home bias of European equity funds
提出一种基于收益的方法，通过估计欧洲股票基金对国内市场的暴露程度来识别其本土偏好，发现部分国家基金存在显著本土偏好且与业绩无关、反而增加风险。
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.