Home Country Bias

AAA

DEFINITION of 'Home Country Bias'

Investors' natural tendency to be most attracted to investments in domestic markets. Investors tend to focus more on their home markets and the companies that do business within these markets because they are familiar with them.

INVESTOPEDIA EXPLAINS 'Home Country Bias'

Investors who exhibits home country bias with their investment allocations tend to hold optimistic expectations about the domestic market and are either pessimistic or indifferent about foreign markets. These investors do not strongly diversify their portfolios with international market securities, which could become a weakness for their portfolios if their home-country suffers serious economic decline.

RELATED TERMS
  1. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  2. Bias

    Biases are human tendencies that lead us to follow a particular ...
  3. Single-Country Fund

    A mutual fund that restricts its investment to the assets of ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments ...
  5. Country Risk

    A collection of risks associated with investing in a foreign ...
  6. Welfare Capitalism

    Definition of welfare capitalism.
RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  2. Why would a country's gross domestic product (GDP) and gross national income (GNI) ...

    A country’s gross domestic product, or GDP, and gross national income, or GNI, are likely to differ considerably because ... Read Full Answer >>
  3. What types of companies benefit from reporting results utilizing constant currencies ...

    Any company that does a substantial amount of business in foreign countries, and is therefore subject to foreign currency ... Read Full Answer >>
  4. What are the differences between B-shares and H-shares traded on Chinese stock exchanges?

    Equity listings in China generally fall under three primary categories: A shares, B shares and H shares. B shares represent ... Read Full Answer >>
  5. What are the differences between H-shares and A-shares on Chinese and Hong Kong stock ...

    Publicly trade companies in China generally fall under three share categories: A shares, B shares and H-shares. A-shares ... Read Full Answer >>
  6. What are the benefits of global depositary receipts (GDRs) to investors?

    Benefits that investing in global depositary receipts (GDRs) can provide to investors include the opportunity to access investment ... Read Full Answer >>
Related Articles
  1. Insurance

    Investing Beyond Your Borders

    Investing abroad poses risks, but can also help you diversify. Discover ways to invest in foreign stocks.
  2. Investing Basics

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  3. Investing Basics

    Why Country Funds Are So Risky

    High returns come at a price, but country funds may still be a good bet.
  4. Mutual Funds & ETFs

    Mitigate Your Equity Risk

    If you think holding a few different stocks is enough, you may be in for an unpleasant surprise.
  5. Economics

    The Most Likely Outcome For Greece

    After more than five years of a Greek drama, most of us have become fatigued with hearing about Greece’s debt problems, the one issue that won’t go away.
  6. Investing

    What’s Driving Markets Today

    While U.S. stocks managed to eke out modest gains last week, it wasn’t without some violent swings along the way.
  7. Economics

    How Gloomy Headlines Support Eurozone Stocks

    It's hard to miss the many headlines on Europe lately with news ranging from Greece’s debt saga to the details of ongoing European Central Bank stimulus.
  8. Investing

    One Step Closer To Normal

    The global interest rate environment is changing. Last week, bond yields in the U.S., U.K., Europe, Japan, Australia and New Zealand all hit new highs.
  9. Economics

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  10. Stock Analysis

    Is Smaller Better When Investing Overseas?

    When it comes to global stocks think small (and not in a market-cap sense). Smaller developed nations have outperformed larger rivals by a big margin.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!