ABSTRACT
Just as the international portfolios underweight foreign assets, the discussion on the reasons for the divergence between observed and optimal portfolios seems to underweight the explanatory role of behavioural and cultural factors. This study contributes to this debate by providing evidence that the mean openness to experience in a given culture has a positive and statistically significant impact on the level of foreign bias.We demonstrate that the effect of openness to experience on foreign bias is robust to the inclusion of culture-related variables and various controls. To the best of our knowledge, this is the first study that analyses how differences in the personalities of individuals from various cultures impact the structure of international equity portfolios (or, more generally, how they impact financial decision-making in an international context). Our investigation extends the fairly limited list of behavioural-based explanations for the existence of the home and foreign bias.
