Home Bias and Performance: a study with Brazilian mutual funds

Nadjara Davi Silva, Rodrigo Fernandes Malaquias, Fernanda Maciel Peixoto

Abstract


Considering the benefits of investing in foreign stocks, and, in contrast, the occurrence of the home bias phenomenon, this research aimed to analyze the relationship between home bias and performance. The sample of the study is comprised of 488 Brazilian mutual funds. We employed a multivariate regression model to analyze the relationship among the variables. As a performance proxy, we adopted the Sharpe index for the period from January, 2010 to December, 2015. The average level of investments in foreign stocks was the independent variable of interest. The main results indicated that home bias seems to be costly and probably it occurs due behavioral biases. In a second regression model, we also found that the mutual funds designed for qualified investors and those requiring higher levels of minimum value for investment tend to present lower levels of home bias.


Keywords


Home bias; Performance; Behavioral biases

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References


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DOI: https://doi.org/10.5902/1983465927864


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