Home bias in theory
Home country bias is a global phenomenon, as most investors hold the vast majority of their wealth in the form of domestic assets. In a 2019 study, Vanguard found that in each case they examined, investors exhibited a strong home-country bias.
Exhibit 1: Home country bias
Regardless of where they live, investors have a significant opportunity to diversify their equity portfolios by investing outside their home market. Despite this opportunity, investors on average have maintained allocations to their home country that have been significantly larger than the country’s market-capitalization weight