It emphasizes foreign equity exposure, observing that, at 57 per cent domestic exposure, Canadians are behind only Australians in having the worst level of
home country bias in their portfolios — despite the fact Canada makes up only about 3.5 per cent of global stock market capitalization.
Not exact matches
So do the increase
in the mobility of saving and investment; the increase
in the desired exposure to foreign assets (the reduction
in home bias); the financial market innovation that allows for better diversification and risk sharing; and the differentials
in the pace of technology adoption or workplace practices that give rise to varying productivity trends across
countries.
An extensive literature
in economics and finance has documented «
home bias,» the tendency that transactions are more likely to occur between parties
in the same
country or state, rather than outside.
Still, for a given level of
home country bias, increased corporate income tax
in that
home country is likely to decrease the level of investment
in that
country.
Historically, American investors have displayed a strong
home country bias when it comes to fixed income, investing more
in U.S. bonds than international bonds.
I may be
biased, but I think that a
home game
in Tiger Stadium is the best college football experience
in the
country!
There may be a bit of
home -
country bias in the advice about holding a third of your equity portfolio
in Canadian stocks.
Canadians who have been wise enough to shrug off the
home -
country bias and invest
in U.S. equities
in recent years have reason to celebrate.
Home bias has been observed
in every
country, but it's a potentially bigger problem
in small
countries like Canada.
Historically, American investors have displayed a strong
home country bias when it comes to fixed income, investing more
in U.S. bonds than international bonds.
As mentioned often here over the past year, people with too much maple
in their accounts paid a high price for that
home -
country bias.
We suffer from a chronic case of
home country bias, and
in the process we may miss a lot of chances to potentially improve the risk / return
in portfolios.
Will the rally
in foreign stocks finally put an end to American investors»
home country bias?
It's called «
home country bias» and it is a tendency to invest
in one's
home country, mainly because it is familiar.
Home country bias is something to mindful of
in Canada for the reason you mentioned (3 % of world market cap, and our market is not well diversified)-- and there is another big reason for it as well: taxes.
I don't understand languages, cultures, economies and markets around the world
in the same way that I do
in my
home country — but I recognize this as a personal
bias, not necessarily reflective of the data.
Home country bias or no, Canadian equities remain the core asset class for domestic investors,
in both registered plans and taxable ones.