Abstract
The objective of this research paper is to identify the explanatory factors of the Home Bias Puzzle (HBP), which has been widely debated in the literature, Using a sample of 40 countries observed over the period 2006-2021. The econometric results obtained the Ordinary Least Squares (OLS) estimation method suggest that all selected explanatory variables are significant (governance variables (panel A), macroeconomic variables (panel B), information asymmetry, familiarity, and geographical variables (panel D), Foreign Trade variables (panel E), and geopolitical variables (panel F)), except for the variables related to market size and microstructure (panel C). It appears that emerging countries exhibit the highest levels of home bias. Indeed, over the entire study period, the average Home Bias in developed countries decreased from 76.39% in 2006 to 47.39% in 2021, representing a decrease of approximately 38%. In contrast, emerging countries display a nearly constant pattern of Home Bias. Specifically, the Home Bias rate was 92.84% in 2006, compared to a rate of 88.47% in 2021. The reasons have been validated within the framework of the six panels A, B, C, D, E, and F.
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