Home Bias
The tendency to hold a far larger proportion of domestic assets than global market weights would suggest.
Formula
Test: domestic allocation substantially exceeds the home market's share of global market capitalisation
Unit
%
In depth
Home bias is near-universal across countries and arises from familiarity, information asymmetry, currency matching and regulation. It is not entirely irrational for an Indian investor: liabilities are in rupees, domestic taxation is simpler, and India's own growth is what funds those liabilities. It becomes costly when it produces a portfolio concentrated in one economy's cycle, since India is a small share of global market capitalisation and its sector mix differs sharply from the world's. Some international diversification reduces portfolio volatility and adds currency exposure that has historically helped rupee investors.
Worked example
India is roughly 4% of global market capitalisation while a typical Indian portfolio holds close to 100% domestic. The concentration may be defensible; it is a decision worth taking deliberately rather than by default.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Home Bias” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.