Patriotism in your portfolio

Type Journal Article - Journal of Financial Markets
Title Patriotism in your portfolio
Author(s)
Volume 14
Issue 2
Publication (Day/Month/Year) 2011
Page numbers 411-440
URL http://www.fsa.ulaval.ca/nfa2003/papiers/Adair Morse.pdf
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.

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