Does the preference for investment in local firms rise in turbulent times? Evidence from the portfolio of Joseph Frisch, private banker (1923–55)

Using a unique historical source, we show that the bias towards local investments can – to a large extent – be explained by overall economic circumstances, the general performance of the market and the level of activity of the investor. We examine portfolio choices Stuttgart private banker Joseph Frisch made throughout his life and find that the preference for local shares was highest in times of insecurity, low returns and reduced investment activity. With higher returns, a stable and growing economy and more experience, the preference for local shares decreased.