ABSTRACT
Previous evidence suggests that the equity portfolios of investors tend to be biased in favour of home country stocks, and investors appear to be reluctant to diversify their portfolios geographically (Lewis 1999). In the paper entitled Cross-Country Differences in Personality and the Foreign Bias in International Equity Portfolios, Paweł Niszczota argues that the sub-optimal allocation of funds abroad is the result of investors’ attitudes towards other cultures, which is approximated by the openness to experience trait from the five-factor model of personality. The authors utilize data on openness to experience in a culture from a previous large-scale study of individuals from 51 countries (McCrae and Terracciano 2005). The degree of openess to experience in investor countries reduces the level of home bias.
