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Home Bias in Greater Resolution – A Sectoral Analysis of Home Bias in the Euro Area

Hughes, Patrick (2020) Home Bias in Greater Resolution – A Sectoral Analysis of Home Bias in the Euro Area. Masters thesis, Dublin, National College of Ireland.

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Abstract

This paper exploits the capabilities of the Securities Holding Database compiled by the European Central Bank to examine home bias, the propensity for investors to overinvest in their domestic market despite apparent diversification benefits. The study is conducted using quarterly data over the period 2014-2019 for euro area countries, and calculates home bias metrics in accordance with the prevailing quantitative methods, primarily by applying a weighting consistent with the International Capital Asset Pricing Model. It uses descriptive and inferential statistics to examine heterogeneity among home bias metrics at the national and sectoral levels.

It further identifies considerably variance among national and sectoral home bias metrics, and specific home bias tendencies for the two largest sectors – investment funds and non-financial companies – which respectively tend to have lower and higher home bias scores relative to their national metrics. The research concludes that extant research conducted at the national level may mask underlying dynamics and complexities, and that there would be a benefit in conducting future research at a finer degree of resolution.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Money > Currency > Euro (Single European Currency)
H Social Sciences > HG Finance > Investment
H Social Sciences > HG Finance > Investment > Investment Strategy
Divisions: School of Business > Master of Science in Finance
Depositing User: Dan English
Date Deposited: 15 Feb 2021 15:56
Last Modified: 15 Feb 2021 15:56
URI: http://norma.ncirl.ie/id/eprint/4763

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