Publication

This paper examines the commonly observed preference of investors to hold positions in national equities. The authors find that there is a preference for large firms and firms that are diversified internationally, implying that investors might obtain substantial international diversification by investing at home. They show that exposure to foreign equity markets is greater for domestic firms that are more diversified internationally. After accounting for home-grown foreign exposure, the share of 'foreign' equities in investors' portfolios nearly doubles, reducing the observed home bias.