[...]... uncertainty avoidance countries include both wealthy and developing countries from all continents In this study we focus on the uncertainty avoidance, individualism, and masculinity dimensions of investor countries Hofstede’s uncertainty avoidance measure has not been studied before in international diversification literature However, a few papers have considered uncertainty avoidance in the international. .. contradicting hypotheses 3 A ten point increase in individualism leads to 4.2 to 4.4% increase in home bias Masculinity is negative and significant; a ten point increase in masculinity corresponds to 1.4 to 3.4% decrease in the level of observed home bias consistent with hypothesis 5 The other independent variables are mostly consistent with past literature’s findings Language and trade, in contrast,... masculinity has not been studied before in finance literature 2.3 Testable hypotheses 10 Culture’s relation to home bias or international diversification has not been established in international finance literature We investigate how cross-cultural differences in behaviors as measured by Hofstede affect portfolio allocation decisions by investment funds from around the world uncertainty avoidance, individualism,... to the international diversification literature Hofstede’s Culture Consequences (1980, 2001) is one of the most influential works in cross-cultural psychology, one of the most cited studies in the entire Social Science Citation Index, and has been widely cited in academic research in marketing and international business The study identifies primary dimensions of culture and differences in thinking, values,... Home bias, international diversification, and the effects of culture 2.1 International diversification and home bias Home bias has been widely documented in finance literature since seminal work by French and Poterba (1991) Home bias refers to the overweighting of domestic securities and underweighting of foreign securities in investment portfolios Several studies attempt to explain biases in portfolio... deviation increase in uncertainty avoidance leads to a 3.3% increase in home bias, and a one standard deviation increase in masculinity leads to 4.4% decrease in home bias As a comparison, a one standard deviation increase in distance, that has been shown to matter the most in home bias literature, corresponds to 8.5% increase in home bias At the country level the economic significances of uncertainty avoidance... and significant sign in specification three and six supporting hypothesis 1, that investor countries with higher uncertainty avoidance show increasing preference for domestic stocks and thus exhibit higher amount of home bias A ten point increase in uncertainty avoidance (measured as an index number between 0 and 120) leads to roughly 2.0 to 2.4% increase in the observed home bias Individualism also... using a country’s predominant language or religion as indicators of culture In contrast, we integrate country-specific measures of culture obtained from comprehensive survey-based research in cross-cultural psychology into the analysis These cultural variables distinguish countries based on concepts such as uncertainty avoidance behavior, individuality versus collectivism, masculinity versus femininity,... Williamson (2003), who study how a country’s principal religion helps to explain variation in the nature and enforcement of creditor rights around the world In contrast, see the previously cited study by Grinblatt and Keloharju (2001), who measure culture in Finland as Finnish or Finnish-Swedish ethnic heritage; investors in Finland tend to invest more in companies headed by CEOs who share their heritage... been defined or measured in order to help explain variation in institutions or legal practices rather than individual investor behavior.2 In contrast, a recent series of papers by Guiso, Sapienza, and Zingales (2004, 2005, 2006, 2007) show that crosscultural differences in trust in others, and especially of foreigners, helps explain stock market participation and other facets of portfolio investment . Results…………………………………………………………………… 97 5.1 US Investment by International Institutions…………………… 97 5.2 Risk Taking by International Institutions……………………… 100 5.3. US Investment and Diversification by International Growth. Citation Index, and has been widely cited in academic research in marketing and international business. The study identifies primary dimensions of culture and differences in thinking, values,. called 'masculine' and the modest, caring pole 'feminine'. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they