Abstract |
More patriotic countries have greater home bias in their equity selection. In a panel of World Values Surveys covering 53 countries, measures of patriotism are positively related to home bias measures after controlling for transaction barriers, diversification benefits, information, and familiarity. Within-country changes in patriotism vary with changes in the home bias. The results are robust to using ISSP measures of patriotism covering 24 countries and within-U.S. data from the Survey of Consumer Finances. Instrumenting patriotism with social variables uncorrelated with economic and political factors confirms that patriotism affects investment. The average country invests $18 to $30 billion more abroad (a 3% to 5% increase) with a one standard deviation drop in patriotism. |