Home bias in online investments: An empirical study of an online crowdfunding market

Mingfeng Lin, Siva Viswanathan

Research output: Contribution to journalArticle

105 Citations (Scopus)

Abstract

An extensive literature in economics and finance has documented home bias, the tendency that transactions are more likely to occur between parties in the same geographical area rather than outside. Using data from a large online crowdfunding marketplace and employing a quasi-experimental design, we find evidence that home bias still exists in this virtual marketplace for financial products. Furthermore, through a series of empirical tests, we show that rationality-based explanations cannot fully explain such behavior and that behavioral reasons at least partially drive this remarkable phenomenon. As crowdfunding becomes an alternative and increasingly appealing channel for financing, a better understanding of home bias in this new context provides important managerial, practical, and policy implications.

Original languageEnglish (US)
Pages (from-to)1393-1414
Number of pages22
JournalManagement Science
Volume62
Issue number5
DOIs
StatePublished - May 1 2016

Fingerprint

Online markets
Home bias
Empirical study
Empirical test
Finance
Economics
Financial products
Financing
Policy implications
Experimental design
Rationality

Keywords

  • Behavioral explanations
  • Crowdfunding
  • Home bias
  • Natural experiment
  • Peer-to-peer lending
  • Quasi-experiment

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

Cite this

Home bias in online investments : An empirical study of an online crowdfunding market. / Lin, Mingfeng; Viswanathan, Siva.

In: Management Science, Vol. 62, No. 5, 01.05.2016, p. 1393-1414.

Research output: Contribution to journalArticle

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