demonstrates that MNCs with U.S. headquarters act substantially like domestic corporations in terms of share prices while failing to offer adequate foreign diversification.
Diversification of a portfolio's assets and asset allocation go hand in hand. The process of choosing a variety of investments within each asset class helps to reduce investment risk and is known as portfolio diversification. The impact of significant market movements on your portfolio may be reduced by asset class diversification as well.
Major Takeaways. Home bias is the preference of an investor to invest largely in native equities rather than achieving diversification through international assets. Investors have a home bias due to transaction costs, accessibility issues, and lack of knowledge about international shares.
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