what is home country bias 
home country bias refers to investors tendency to favor companies from their own country over those from other countries or regions the tendency to invest in our own backyard is not unusual or surprising it is a worldwide phenomenon and certainly not unique to u s investors this bias is also understandable because we are inclined to recognize and value domestic brands understanding home country biasinvestors who exhibit home country bias with their investments tend to be optimistic about their domestic markets and are either pessimistic or indifferent toward foreign markets in fact some investors likely would continue to invest in a favorite home country company even if a similar foreign company had demonstrated better upside potential home country bias occurs when people include a large percentage of stock from their own countries in their portfolios if you look at the average person s asset allocation you will see that investors of all sizes have a strong propensity to overweight their exposure to domestic stocks the united states for example represents less than 50 of the total world market capitalization yet the average u s investor still allocates more than 70 of their portfolio to u s equities this bias is one reason that building a powerful brand in today s interdependent global market is so important coca cola google and toyota for example all are well known international brands and most people no matter where they live are inclined to buy their stocks home country bias can cause an investor to build an unbalanced portfolio that lacks diversification and is subject to unnecessary risk 