Home Country Bias

Global diversification is one of the keys to a well-constructed portfolio. We have known this for a long time, and investors have been largely ignoring it for just as long.

In a 1991 paper titled Investor Diversification and International Equity Markets, Kenneth R. French and James M. Poterba documented the concept of investors’ preference for owning stocks in their home country, commonly known as home-country bias.
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References in this episode:
- Investor Diversification and International Equity Markets: https://www.nber.org/papers/w3609
- The global case for strategic asset allocation and an examination of home bias: https://personal.vanguard.com/pdf/ISGGAA.pdf
- Do Global Stocks Outperform US Treasury Bills? : https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3415739
- Global equity investing: The benefits of diversification and sizing your allocation: https://www.vanguard.com/pdf/ISGGEB.pdf

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