Appraising home bias exposure

This paper explores the investment impact of the large and persistent home bias in the equity allocations of the five largest European pension fund markets since the global financial crisis. 

For this study, the second in our series on the effects of home bias, we examined the industry concentrations, performance and return-to-risk profiles of the equity markets in France, Germany, Netherlands, Italy and Spain in the aftermath of the global financial crisis. For most of the 12 years reviewed, all five markets underperformed their respective international counterparts, as euro weakness and higher volatility took a major toll on risk-adjusted returns. As these findings indicate, maintaining a home bias in their asset allocations has been extremely costly for Eurozone investors.

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