Which of the following statements is true?

Question

Quizplus · Accepted Answer

Research has shown that investors tend to have a preference for investing in companies located in their home country, which leads to a home bias in their portfolio holdings. This is driven by factors such as familiarity, information asymmetry, and patriotism. Therefore, option B is the correct statement. Option A is incorrect as it implies that investors prefer investing in foreign securities. Option C is also incorrect as it assumes that all international investors aim for an optimal international portfolio, which may not be true. Option D is partially correct but does not give a complete picture as the foreign bias in portfolio holdings may also be influenced by other factors besides portfolio theory.

Which of the Following Statements Is True