Deviations from normality in financial return series have led to the development of alternative portfolio selection models. One such model is the downside risk model, whereby the investor maximizes his return given a downside risk constraint. In this paper, we empirically observe the international equity allocation for the downside risk investor using nine international markets' returns over the last 34 years. The results hold for both daily and monthly data; and also from an international perspective. Due to greater downside risk, investors may think globally, but instead act locally. The model's results therefore provide an alternative view of the home bias puzzle.
Campbell, R. A. J., & Kraeussl, R. (2007). Revisiting the home bias puzzle: Downside equity risk. Journal of International Money and Finance, Nov 07(26), 1239-1260. https://doi.org/10.1016/j.jimonfin.2007.06.013