home bias

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The tendency for consumers to spend relatively more on their own country's products than the world average, and relatively less on the products of other countries. This is due partly to international differences in tastes, partly to government policies concerning tariffs and non-tariff barriers to trade, and partly to the cost and difficulty of obtaining full and reliable information on what foreign products are available. A similar effect is shown in international differences in portfolio holdings. Investors tend to hold relatively more of their own country's bonds and shares than the world average, and relatively fewer foreign bonds and shares.

Subjects: Economics.

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