Seminar: Kasper Meisner Nielsen, Chinese University of HongKong and CEBR.

Titel:
How Financial Illiteracy and Political Preferences Influence Equity Home Bias.

Abstract

This paper uses a unique dataset of pension funds from Denmark to investigate the influence of financial illiteracy and political preferences on portfolio decisions. We focus on equity home bias, and exploit the variation in pension funds management and board characteristics as source of identification. We find that pension funds with a financial literate board diversify more internationally, whereas pension funds with politically influenced boards do less so. Moreover, as pension funds are preceived to be professional investors these results are likely to extend to individuals and households. Overall, our empirical results demonstrate two novel explanations for equity home bias.