Suppose that U.S.equity markets represent about 35% of total global equity markets and that the typical U.S.investor has about 95% of their portfolio invested only in U.S.equities.This is an example of _________.

Question

Quizplus · Accepted Answer

This is an example of home country bias, as the typical U.S. investor has a disproportionately large allocation to U.S. equities relative to the global equity market. Because U.S. equity markets represent only 35% of total global equity markets, a portfolio that is 95% invested in U.S. equities is not well diversified globally. Excessive diversification, active management, and passive management are not relevant concepts for this scenario.

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