LOCAL PORTFOLIO CHOICES OF TURKISH INDIVIDUAL INVESTORS

• Published in: Economic and Social Development: Book of Proceedings pp. 244 - 252
• Main Authors: Arik, Evren, Suer, Omur
• Format: Conference Proceeding
• Language: English
• Published: Varazdin Varazdin Development and Entrepreneurship Agency (VADEA) 08.12.2017
• Subjects: Advantages; Behavior; Behavioral economics; Bias; Datasets; Diversification; Economics; Equity; Finance; International finance; Investment advisors; Portfolio management; Portfolios; Quantitative analysis; Regional stocks; Securities markets; Stock exchanges; Stocks; Studies; Istanbul Turkey; Turkey; United States > US
• ISSN: 1849-6903

Although the advantages of diversification are emphasized by traditional finance theories, individual investors often tend to hold only a few domestic stocks in their portfolios. This phenomenon has been subject to research since the last two decades under the title of home bias. The preference for investing close to home also applies to portfolios of domestic stocks. In other words, asymmetric information between local and nonlocal investors may drive the preference for geographically proximate investments and this phenomenon is called local bias in the terminology of behavioral finance. This study provides new evidence concerning local bias of individual investors in an emerging country 's stock market namely, Borsa Istanbul (BIST). More specifically, this study investigates whether individual investors weigh shares of firms, which are geographically close to themselves, more than expected in their portfolios. The results of the analyses indicate that Turkish individual investors are prone to local bias on the average. Furthermore, the findings suggest that the reason for their tendency to invest in local stocks is not informational advantage.