Filed Under »
 |
Definition of 'Home Bias'
The tendency for investors to invest in a large amount of domestic equities, despite the purported benefits of diversifying into foreign equities. This bias is believed to have arisen as a result of the extra difficulties associated with investing in foreign equities, such as legal restrictions and additional transaction costs.
|
 |
Investopedia explains 'Home Bias'
Investing in foreign equities tends to lower the amount of systematic risk in a portfolio because foreign investments are less likely to be affected by domestic market changes.
However, investors from all over the world tend to be biased toward investing in domestic equities. For example, an academic study from the late 1980s showed that although Sweden possessed a capitalization that only represented about 1% of the world's market value of equities, Swedish investors put their money almost exclusively into domestic investments.
|
-
See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
Read More »
-
Diversifying can mean not only investing in various asset classes but also venturing beyond domestic exchanges.
Read More »
-
Without this risk-reduction technique, your chance of loss will be unnecessarily high.
Read More »
-
-
Do you have the best mix of investments? Find out how to make sure.
Read More »
-
Risk aversion seems to come to us naturally, preventing us from stepping into unfamiliar territory. But feeling comfortable isn't always the best thing for your portfolio.
Read More »
-
Read More »
|
|
