Executive Summary
It is a well-known fact that investors skew their equity exposures toward their home country – that is, they exhibit a home country bias. According to data from the IMF’s Coordinated Portfolio Investment Survey, U.S. investors allocated over 70% of their equity assets to the U.S. even though based on market capitalization the U.S. represents less than 50% of the opportunity set. This by no means is a U.S.-only phenomenon. Canadian and Australian investors exhibit similar levels of concentration of equity exposures (60%-70%) in their domestic markets despite these markets representing only 3.3% and 2.4% of the global opportunity set based on their respective weights in the MSCI ACWI index. Rather than buy the comfortable asset, investors should ask, “What’s in the price?”
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