A Study Of Local Bias And Its Determinants

Using a large and unique set of Swedish data at the individual investor level the authors study local bias among investors. In relation to existing research they expect that Swedish investors are prone to local bias, and that the local bias is stronger for individuals than institutional investors. They furthermore expect the extent of the bias to be associated with market sentiments and risk. The empirical analysis is based on a pseudo panel data, in which they use information of the investors, the investment objects and market sentiments. The data is tested with a linear fixed effects regression model.