Looking abroad: the domestic bias that makes Brazilian investors concentrate their portfolio in the country
According to Seu Dinheiro, the country's investors tend to exaggerate the share of local assets in their portfolio, more than investors from other emerging markets.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM SEU DINHEIRO · 2 MIN
A Venezuelan friend, a Hispanic singer, told Seu Dinheiro that Brazil would be the only country with a word for 'Brazilianness'. The author of the text himself says he does not know whether the statement is correct, but the observation serves as a starting point for a larger question: why do Brazilians look inward so much, whether in cultural consumption or when putting together their portfolio?
In the same vein, the same friend complains that foreign music doesn't 'take on' in Brazil and that the public is stuck with global hits and soap opera soundtracks. According to the report, the country consumes a lot of its own culture, even though it is an emerging economy, a behavior that is not limited to musical taste.
Seu Dinheiro uses this portrait to address domestic bias, known in English as home bias, which also appears in investments and not just in culture. According to the text, this bias is common to investors around the world. What draws attention in the Brazilian case is the intensity: the country's investors exaggerate the proportion of Brazilian assets in the portfolio, more than investors from other emerging markets.
This excessive weight of the local market makes assets more sensitive to movements within a single economy. The published excerpt does not provide figures on the size of this concentration, which is why the exact size of the phenomenon is not measured here.
What changes for the investor
For those who operate the stock market, Nasdaq, interest rates or the dollar, the central point is to check how much of their assets depend on a single country and a single currency. Foreign assets are included in this account as a way of reducing dependence on the local scenario, without this meaning predicting which market will yield more. As the opening of the report does not detail the week's events, readers who want to follow these events need to look for the data in the Seu Dinheiro edition itself. This article is not a recommendation to buy or sell.
Automatically translated from Portuguese.
