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Quote:What is home bias?
Home bias is the inclination for investors to invest the majority of their savings into local equities and bonds.
The phenomenon was first highlighted by a research paper made by Kenneth French and James Porterba in 1991. They concluded that most investors still hold most of their assets in local assets, despite research-backed benefits of international diversification. Home bias led to higher risk in their investment portfolios over the long-term.
This phenomenon has been observed recently, and in Singapore as well. As evident from the chart below, despite how Singapore equities only represent 0.4% in global equity indices, on average, Singaporean investors have 39% of their portfolio in Singapore’s stocks.
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source: https://endowus.com/insights/home-bias-i...gaporeans/
wiki: Equity Home Bias Puzzle (https://en.wikipedia.org/wiki/Equity_home_bias_puzzle)
If this bias is well-known and simple to mitigate today due to rise of low cost brokerage; why's "home bias" still common among local OPMIs? Or is there another angle to look at this: e.g. local tax advantage (no dividend tax, no capital gains tax), security of CDP etc.
On a related note:
Warren Buffett famously repeated, especially in times of crisis: "never bet against America". Is that simple home bias/American exceptionalism, or is there a larger insight behind that statement? Is America special, in the global context?
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger