Equity home bias in Dutch industry-wide pension funds

Integration of financial markets allows investing aboard. International diversification provides with higher returns and reduces portfolio risk. However, despite the well-documented benefits of diversification many investors still hold larger proportion of domestic equity in their international portfolio, phenomenon known as home bias. This paper investigates to which extend Dutch industry-wide pension funds are exposed to equity home biased during years 2011 and 2012 by examining their individual characteristics: size, maturity and funding status. It is demonstrated that Dutch industry-wide pension funds are not exposed to home bias and therefore they pursue rational equity diversification and take advantage of the benefits of international diversification.