‘Familiar’ Doesn’t Mean ‘Safe’

Behavioral finance is the study of human behavior and how that behavior leads to investment errors, including the mispricing of assets. Among the many behavioral biases well-documented in the literature is “local” bias—individual investors tend to invest more in stocks that are close to home.

There’s also evidence that local bias extends to the behavior of institutional investors. And what’s more, there is evidence that it affects not just public equity, but private equity.

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