Despite the disappearance of formal barriers to international investment across countries, we find that the average home bias of US investors towards the 46 countries with the largest equity markets did not fall from 1994 to 2004 when countries are equally weighted but fell when countries are...

Standard portfolio theories of the home bias are disconnected from corporate finance theories of insider ownership. We merge the two into what we call the optimal ownership theory of the home bias. The theory has the following components. In countries with poor governance, it is optimal for...