The literature on international equity holdings distinguishes between home bias (overweighting of home stocks) and foreign bias (relative underweighting for more 'distant' countries). The two biases can be integrated into one distance-based model. We define pure home bias as the excess of home...

This paper uses recent developments from the fields of cognitive neuroscience and psycho-linguistics to introduce a new measure of proximity to the set of typical gravity variables in a model for bilateral home bias. Given the `weightlessness' of financial assets, gravity variables (among which...