Home Bias

Home bias is important as it may affect both risk and profit potential for investors.

Home bias. We call the above phenomena the home bias of corporate subsidiary locations a phrase borrowed from the investment literature coval and moskowitz 1999. What is home bias. Evidence from israel investment analysts journal 10 1080 10293523 2019 1664531 1 15 2019.

Anderson michael joseph crawley the impact of linguistic distance and financial reporting readability on foreign holdings of u s. Home bias is the inclination for investors to invest the majority of their savings into local equities and bonds. Home bias is the tendency to stick with what feels comfortable.

This bias is believed to have arisen. The equity home bias puzzle is the term given to describe the fact that individuals and institutions in most countries hold only modest amounts of foreign equity this is puzzling clarification needed since observed returns on national equity portfolios suggest substantial benefits from international diversification the home bias in equities was first documented by french and poterba 1991. Hometown firms support provincial level politicians by opening more and larger subsidiaries within the home provinces because these subsidiaries are expected to increase employment.

Sivan riff joseph yagil the driving forces behind the home bias phenomenon. Investors natural tendency to be most attracted to investments in domestic markets. The phenomenon was first highlighted by a research paper made by kenneth french and james porterba in 1991.

A term referring to the propensity of individuals to make financial investments in their home country rather than in foreign markets. Of the several factors that contribute to home bias the strongest is familiarity investors just feel more comfortable trading the stocks of the companies they are most familiar with. Investors tend to focus more on their home markets and the companies that do business within.

Home bias is a response to a lack of knowledge about foreign investments and a resistance to the perceived hassle of trading them. Stocks or shares of the company where they work. The consequence of home bias however is that the investor is not diversified properly and can be shouldering unnecessary risk.