In general, the fact that – private households mostly prefer goods produced in their own country to imported goods (the preference by individuals for goods produced in their own country compared to imports); – private investors prefer to buy securities and, in particular, stocks from their own country; also called investment ambiguity, unflatteringly and vaguely. Investors believe that they can better assess their strengths and weaknesses; even when the risk of domestic exposures is in fact no lower or possibly even higher than that of investments in foreign securities (an inclination to invest in domestically issued papers; people habitually focus on their home markets because they are familiar with them). – With European financial market integration, the home bias of German investors had declined significantly. However, the financial crisis that followed the subprime crisis led to a significant increase in home bias. – Indicator of how strongly foreign stocks are held by domestic investors, measured by their weight; sometimes also calculated by market value. If the index is one hundred percent, only domestic securities are held; if zero percent, the composition of the portfolio is evenly distributed around the world; if the index is negative, foreign securities are overrepresented. – See investment ambiguity, financial market integration, European, SEPA Council. – Cf. figures on domestic and foreign securities sales and purchases in the Statistical Section of the respective Monthly Report of the Deutsche Bundesbank, “Rubrik” Kapitalmarkt”; ECB Monthly Report of November 2006, p. 15 (graphical overview of home bias), Deutsche Bundesbank Monthly Report of July 2008, p. 20 (overview of home bias in selected countries), Deutsche Bundesbank Monthly Report of December 2008, p. 34 (reduction of home bias in the European Monetary Union; references), Deutsche Bundesbank Monthly Report of December 2009, pp. 42 f. (home bias in assets), p. 46 (in note 5 formula for calculation), ECB Monthly Report of May 2010, pp. 41 ff. (influence of financial market integration as well as the financial crisis on home bias; many overviews; references).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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