Abstract
In most if not all countries the proportion of portfolio assets that investors allocate to foreign securities is clearly less than mean-variance analysis predicts. In Germany, for example, mutual funds hold only 66 percent of their investments in non-German securities while the latter represent almost 85 percent of the worldwide market value for bonds and 95 percent for equities. Even greater discrepancies exist for other financial intermediaries such as insurance companies or pension funds. Finally, the poorest portfolio diversification is exhibited by private German investors whose direct investments abroad only amount to 37 percent and 19 percent of their stock and bond holdings, respectively (for the year 2001: see Deutsche Bundesbank, 2001, 2004c).
This chapter benefited from discussions with Gerrit Klages and Tilo Wannow. We also thank seminar participants at Bamberg University and participants at the workshop Economics Meets Psychology 2005 held by the German Central Bank (Deutsche Bundesbank). The authors are grateful to Ralf Borger, Peter Thomas, and Kerstin Voeller for technical support. The usual disclaimer applies. The authors are grateful to the mutual funds for providing us with their reports and to Morgan Stanley for their support on MSCI All-Country Index data.
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© 2007 Andreas Oehler, Marco Rummer, Thomas Walker and Stefan Wendt
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Oehler, A., Rummer, M., Walker, T., Wendt, S. (2007). Are Investors Home Biased? Evidence from Germany. In: Gregoriou, G.N. (eds) Diversification and Portfolio Management of Mutual Funds. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230626508_3
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DOI: https://doi.org/10.1057/9780230626508_3
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