Many of the portfolios that we have seen in the last two years (not managed by Baffin), had an excessive concentration of domestic assets: stocks, bonds, real estate, etc. The tendency to overinvest in local assets is known as “home bias” and it is still a puzzle in the academic world. Assuming that the investors are rational, how could economists explain that investors would rather invest their savings in an inefficient portfolio? Why would any investor favor a portfolio that has lower returns for any risk level?

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