Local home bias: Theory and new empirical evidence from Italy

Baschieri, Giulia (2012) Local home bias: Theory and new empirical evidence from Italy, [Dissertation thesis], Alma Mater Studiorum Università di Bologna. Dottorato di ricerca in Mercati e intermediari finanziari, 24 Ciclo. DOI 10.6092/unibo/amsdottorato/4415.
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This thesis examines the literature on local home bias, i.e. investor preference towards geographically nearby stocks, and investigates the role of firm’s visibility, profitability, and opacity in explaining such behavior. While firm’s visibility is expected to proxy for the behavioral root originating such a preference, firm’s profitability and opacity are expected to capture the informational one. I find that less visible, and more profitable and opaque firms, conditionally to the demand, benefit from being headquartered in regions characterized by a scarcity of listed firms (local supply of stocks). Specifically, research estimates suggest that firms headquartered in regions with a poor supply of stocks would be worth i) 11 percent more if non-visible, non-profitable and non-opaque; ii) 16 percent more if profitable; and iii) 28 percent more if both profitable and opaque. Overall, as these features are able to explain most, albeit not all, of the local home bias effect, I reasonably argue and then assess that most of the preference for local is determined by a successful attempt to exploit local information advantage (60 percent), while the rest is determined by a mere (irrational) feeling of familiarity with the local firm (40 percent). Several and significant methodological, theoretical, and practical implications come out.

Tipologia del documento
Tesi di dottorato
Baschieri, Giulia
Dottorato di ricerca
Scuola di dottorato
Scienze economiche e statistiche
Settore disciplinare
Settore concorsuale
Parole chiave
Local bias; Segmented markets; Information asymmetries; Firm visibility; Firm opacity
Data di discussione
20 Aprile 2012

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