Home Bias


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.

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.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Home Bias — Der Begriff Heimatmarktneigung bzw. Equity Home Bias Puzzle bezeichnet die Tendenz von Investoren, Geldanlagen auf dem Heimatmarkt überproportional zu gewichten. Inhaltsverzeichnis 1 Hintergrund 2 Gründe 3 Analoge Wirkungen 4 …   Deutsch Wikipedia

  • Home bias in trade puzzle — The Home bias in trade puzzle is a widely discussed problem in macroeconomics and international finance, first documented by John T. McCallum in an article from 1995.citation | last1 = McCallum| first1 = John T. | year=1995 |title= National… …   Wikipedia

  • Equity home bias puzzle — The Equity home bias puzzle is the term given to describe the fact that individuals and institutions in most countries hold modest amounts of foreign equity. This is puzzling since observed returns on national equity portfolios suggest… …   Wikipedia

  • Home advantage — In team sports, the term home advantage (also called home field/court/diamond/ice advantage) describes the advantage–usually a psychological advantage–that the home team is said to have over the visiting team as a result of playing in familiar… …   Wikipedia

  • Bias — Biases are human tendencies that lead us to follow a particular quasi logical path, or form a certain perspective based on predetermined mental notions and beliefs. When investors act on a bias, they do not explore the full issue and can be… …   Investment dictionary

  • Bias tape — or bias binding is a narrow strip of fabric, cut on the bias (UK cross grain ). The strip s fibers, being at 45 degrees to the length of the strip, makes it stretchier as well as more fluid and more drapeable compared to a strip that is cut on… …   Wikipedia

  • Bias (textile) — Bias or cross grain of cloth. The bias (US) or cross grain (UK) direction of a piece of woven fabric, usually referred to simply as the bias or the cross grain , is at 45 degrees to its warp and weft threads. Every piece of woven fabric has two… …   Wikipedia

  • Home range — is a concept that can be traced back to a publication in 1943 by W. H. Burt, [Burt, W. H. 1943. Territoriality and home range concepts as applied to mammals. Journal of Mammalogy 24:346–352.] who constructed maps delineating the spatial extent or …   Wikipedia

  • Bias T — A bias “T” is used to insert DC power into an AC signal to power remote antenna amplifiers or other devices. It is usually positioned at the receiving end of the coaxial cable to pass DC power from an external source to the coaxial cable running… …   Wikipedia

  • BIAS — Das Bremer Institut für angewandte Strahltechnik GmbH (BIAS) ist ein privatwirtschaftliches Forschungs und Entwicklungsinstitut auf dem Gebiet der Lasertechnik. Am 1. Juli 1977 wurde es von Gerd Sepold und Werner Jüptner als erstes… …   Deutsch Wikipedia