Abstract
Scholarship in finance has paid relatively little attention to the role of culture in financial decision-making relative to other business disciplines and economics. This paper will review what research has been done to date including a critical assessment of the key databases used to measure differences in cultural values. Notwithstanding the concerns with the measures of cultural values, I conduct an empirical analysis of the role of cultural distance for explaining the foreign bias in international portfolio holdings using traditional gravity models in economics. I affirm the statistical explanatory power of culture for these investment biases and outline several new potential directions for research.
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