The University of Texas at Austin
  • Prof looks at "Perils of Staying Too Close to Home"

    By News Administrator
    Published: June 30, 2008
    Prof

    There’s no place like home, but staying too close to home can have unintended consequences for investors. Americans tend to put a disproportionate share of their money into shares of companies based in their own states, new research has shown, and that bias that can be exploited by sophisticated traders. These insights come from “Long Georgia, Short Colorado? The Geography of Return Predictability,” a study by George M. Korniotis, an economist on the staff of the board of governors of the Federal Reserve, and Alok Kumar, an assistant professor of finance at the University of Texas, Austin. The tendency of investors to favor their home countries has been well documented. The new study goes beyond such “home bias,” using the term “local bias” to refer to investors’ tendency to favor companies from their home states.

    The New York Times
    The Perils of Staying Too Close to Home
    June 15

    • Quote 2
      Steve Sanchez said on Aug. 20, 2010 at 3:32 a.m.
      I think it is just easier for people to see their "investment" close to them, than to invest some distance away. So you can sort of understand their emotions. People want to be able to watch their investment flourish and the easiest way to do that is to keep it close to you physically at all times. But with that said, people need to take a chance and expand their scope of investment. Remember, diversity is always good.
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