Which of the following could account for investors' tendency to favor local assets? A the additional information costs of international diversification
B the ability of a domestic stock portfolio to hedge domestic inflation risk
C the higher returns typically earned on foreign investments

Question

Quizplus · Accepted Answer

A and B are correct because both the additional information costs of international diversification and the ability of a domestic stock portfolio to hedge domestic inflation risk can lead investors to favor local assets. Higher returns on foreign investments would generally attract investors rather than deter them, making C incorrect in this context.

Which of the Following Could Account for Investors' Tendency to Favor