DETERMINATION OF EQUITY HOME BIAS IN TURKEY

However, despite the dramatic increase in cross-border securities trading and the removal of many formal barriers to international investment during the past decades, investors still overweight domestic stocks in their portfolios. this phenomenon, referred to as the home bias or domestic bias, that continues to be a puzzle in the financial literature, is inconsistent with standard asset pricing theory and runs counter to the benefits of international diversifications of equity portfolios. the aim of this research is to determine the level of the equity home bias for turkish investors according to both turkey and target countries. in this context, home bias for turkey and homes biases for 20 target countries invested in between 2001 and 2010 were calculated. results suggest that equity home bias, calculated using international capital asset pricing model as a benchmark, were vey high. these findings revesals that turkish investors tend strongly towards local investments and don’t benefit enough from international diversification.