Which of the following is not a potential explanation for the home bias in portfolio holdings?

Question

Quizplus · Accepted Answer

The higher rate of return on domestic stocks is actually a potential explanation for home bias in portfolio holdings. A higher rate of return on domestic stocks would cause investors to favor domestic portfolios over foreign ones. The other options, including hedging inflation risk, legal and institutional restrictions, and taxes/transaction costs, are all potential reasons why investors may prefer domestic portfolios over foreign ones.

Which of the Following Is Not a Potential Explanation for the Home