Suchergebnisse

Using a unique data set that contains the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, and especially mutual funds, are momentum traders, whereas private households are contrarians. Contrarian trading by private households declines with investors' financial sophistication though, as proxied by financial wealth and equity home bias. Observing momentum trading over time, we document substantial increase in sales of loser stocks by foreign and institutional investors during the market downturn of the Great Recession and just before the crash of the momentum strategy in 2009. Finally, our evidence indicates that excessive sales of loser stocks pushed prices below their fundamental value, predicting the relative overperformance of past losers and the reversal of the momentum strategy.

Extant literature consistently documents that investors tilt their domestic equity portfolios towards regionally close stocks (local bias). We hypothesize that individual investors' local bias is not limited to the domestic sphere but instead also determines their international investment decisions. Our results confirm the presence of a cross-border local bias. Specifically, we show (i) that the stockholdings of individual investors living within regional proximity to a foreign country display a significantly lower foreign investment bias towards investment opportunities in that country and (ii) that this drop in foreign investment bias levels is disproportionately driven by investments in regionally close neighborcountry companies. The impact of cross-border local bias on investors' bilateral foreign equity investments is economically significant and holds even after controlling for previously identified explanations of international asset allocation. -- Local bias ; foreign investment bias ; portfolio diversification ; individual investor behavior ; household finance

We analyze the effect of geographic proximity on individual investors portfolio choice. Using a unique data set which covers the common stockholdings of private households at regional banks in Germany, we document strong and consistent overinvestment in geographically close companies. Our results conclusively reject the presence of an informational advantage (home-field advantage) of local over non-local investors. Instead, households preference for local equity turns out to be familiarity-driven. We conclude that individual investors local bias is induced by ambiguity aversion in the portfolio selection process rather than a trading strategy based on superior information about local companies.