GLOSSARY · INVESTING
Home bias
The tendency to hold far more of your own country's stocks than that country's share of world markets would suggest. It concentrates a portfolio in one economy, one currency and one set of policies, usually the same ones your job and home already depend on. Some home bias can be deliberate, since spending is in your own currency, but it is a choice worth making on purpose.
Also called: home country bias, domestic bias
FORMULA
Home bias = home share of your stocks − home share of world stock market value
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · STOCKS & BONDS MASTERY · STRATEGIESAsset Allocation: Choosing Your Mix of Stocks and BondsCHAPTER · STOCKS & BONDS MASTERY · STRATEGIESInternational Stocks, Currency and Home BiasRELATED TERMS
SOURCES
- Investor Diversification and International Equity Markets. French & Poterba, American Economic Review, 1991.