Industry-Level Home Bias

This paper examines the home bias phenomenon in international finance at the industry level. Using unique financial datasets, I calculate the sectoral home bias of 27 industries in 43 countries. The empirical findings include: (1) home bias is stronger when and where capital restrictions are greater, (2) nontradable sectors exhibit stronger home bias, and (3) home bias decreases in sectoral productivity, suggesting that investors show a stronger preference for domestic assets of less productive sectors. To rationalize this empirical finding, I build a model with a multi-sectoral setting to shed light on the implications of industrial structure for international portfolio choice. About CAFIN The Center for Analytical Finance (CAFIN) includes a global network of researchers whose aim is to produce cutting edge research with practical applications in the area of finance and financial markets. CAFIN focuses primarily on three critical areas: • Market Design • Systemic Risk • Financial Access Seed funding for CAFIN has been provided by the Division of Social Sciences at the University of California, Santa Cruz. Industry-Level Home Bias