{"64127":{"#nid":"64127","#data":{"type":"news","title":"Study Shows Home Bias in Foreign Investment Decisions","body":[{"value":"\u003Cp\u003EWhen investing in foreign stocks, investors show a strong preference toward companies that have a physical presence in their home country, according to a study by a Georgia Tech College of Management researcher. The type of presence in question involves corporate operations or subsidiaries, not just exporting products somewhere.\u003C\/p\u003E\u003Cp\u003E\u0022The idea of international investment is to diversify your portfolio globally,\u0022 explains Qinghai Wang, associate professor of finance at Georgia Tech. \u0022But you might not be truly doing that if you invest in companies strongly affected by your home economy \u2013 for example, diversifying in Japanese stocks but choosing companies like Toyota and Honda with a heavy U.S. presence.\u0022\u003C\/p\u003E\u003Cp\u003EWang conducted the study, \u0022Home Bias in Foreign Investment Decisions,\u0022 with Dongmin Ke of Kean University and Lilian Ng of the University of Wisconsin-Milwaukee.\u003C\/p\u003E\u003Cp\u003EPublished in the \u003Cem\u003EJournal of International Business Studies\u003C\/em\u003E, the study shows that even mutual fund managers \u2013 professionals who might be expected to have a broader worldview \u2013 are prone to this \u0022home bias.\u0022 The researchers examined the U.S. equity holdings of more than 3,000 non-U.S.-based mutual funds from 22 developed and developing countries for the period 2001-2002. The study focused solely on the fund managers\u0027 foreign investments in the U.S. equity market.\u003C\/p\u003E\u003Cp\u003E\u0022Fund managers who have different languages and cultural backgrounds and are located farther away from U.S. equity markets are more likely to invest in U.S. firms with local presence,\u0022 write the researchers. \u0022Fund holdings of such stocks, however, perform no better than a passive portfolio of all U.S. stocks with local presence, suggesting that the local presence of foreign firms does not provide significant information advantages to local fund managers.\u0022\u003C\/p\u003E\u003Cp\u003EIn addition, the home bias shown by the study was independent of the global visibility of a firm. For instance, foreign investors still might be less likely to invest in a company as widely known as Coca-Cola if it didn\u0027t have an operational presence in their home country. \u003C\/p\u003E\u003Cp\u003E\u0022Our evidence implies that firms could raise equity financing in the foreign markets by establishing a foreign presence in those markets, and policymakers could attract foreign investments in their domestic equity markets by encouraging domestic firms to expand internationally,\u0022 write the researchers.\u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":"","field_summary_sentence":[{"value":"When investing in foreign stocks, investors show a strong preference toward companies that have a physical presence in their home country, according to a study by a Georgia Tech College of Management researcher."}],"uid":"27271","created_gmt":"2011-02-08 14:19:00","changed_gmt":"2016-10-08 03:08:06","author":"Brad Dixon","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2011-02-08T00:00:00-05:00","iso_date":"2011-02-08T00:00:00-05:00","tz":"America\/New_York"},"extras":[],"hg_media":{"64129":{"id":"64129","type":"image","title":"Qinghai Wang","body":null,"created":"1449176720","gmt_created":"2015-12-03 21:05:20","changed":"1475894564","gmt_changed":"2016-10-08 02:42:44","alt":"Qinghai Wang","file":{"fid":"191945","name":"070816CR047.JPG","image_path":"\/sites\/default\/files\/images\/070816CR047_0.JPG","image_full_path":"http:\/\/hg.gatech.edu\/\/sites\/default\/files\/images\/070816CR047_0.JPG","mime":"image\/jpeg","size":3402527,"path_740":"http:\/\/hg.gatech.edu\/sites\/default\/files\/styles\/740xx_scale\/public\/images\/070816CR047_0.JPG?itok=0yz1LVPh"}}},"media_ids":["64129"],"groups":[{"id":"1274","name":"Scheller College of Business"}],"categories":[{"id":"139","name":"Business"}],"keywords":[{"id":"2630","name":"business school"},{"id":"4175","name":"finance"},{"id":"9313","name":"Georgia Tech College of Management"},{"id":"11844","name":"home bias"},{"id":"11845","name":"investment decisions"},{"id":"11841","name":"investments"},{"id":"11843","name":"Journal of International Business Studies"},{"id":"11842","name":"Qinghai Wang"},{"id":"168076","name":"Stocks"}],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cp\u003EBrad Dixon\u003C\/p\u003E\u003Cp\u003EGeorgia Tech College of Management\u003C\/p\u003E\u003Cp\u003E404-894-3943\u003C\/p\u003E\u003Cp\u003E\u003Ca href=\u0022mailto:brad.dixon@mgt.gatech.edu\u0022\u003Ebrad.dixon@mgt.gatech.edu\u003C\/a\u003E\u003C\/p\u003E","format":"limited_html"}],"email":["brad.dixon@mgt.gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}