What accounts for the home bias phenomenon?

What will be an ideal response?

Home bias refers to the phenomenon that investors, even in the developed world, have not fully internationally diversified their portfolios which are consequently heavily invested in their own stock markets. No well-accepted explanation for why investors forego the benefits of international diversification exists.
Home bias is definitely declining over time, which suggests that the direct barriers to international investment did play a role in the past. For most countries, these barriers have been dismantled and can no longer explain why investors do not invest abroad. Yet, for many emerging markets, certain forms of capital controls still exist and have actually regained some popularity during and after the 2007-2010 global financial crisis. Other country specific factors may keep institutional investors out and cause home bias.
Arguments such as the idea that currency risk increases the riskiness of foreign investments or that foreign investments are costlier than domestic ones are unlikely to be valid explanations. Because currency changes show little correlation with local equity markets, they add little to the volatility that U.S. investors face when investing in foreign equity markets. Moreover, currency volatility can be hedged. Transaction costs may play a role, but in order to generate the observed portfolio proportions of U.S. investors, U.S. investors would have to think that the average returns on foreign stocks were 2% to 4% per annum less than the realized average returns on foreign assets. It may be that these figures represent U.S. investors' perceived transaction costs of foreign investing, but it is unlikely. Moreover, the huge volume of international capital flows is also inconsistent with the transaction costs story, as is the fact that foreign countries are home biased.
Perhaps the most popular explanation of home bias is that international investors have an informational disadvantage relative to local investors, which cause international investors to invest less abroad, or to not invest at all in unknown foreign markets. For public investments, this story also is not entirely appealing. It is easy enough to obtain information on foreign companies or to set up or use local investment managers. However, it may be that the quality of the information and a poor regulatory framework in terms of investor protection and corporate governance keep out U.S. institutional investors. This may explain why foreign companies like to list ADRs, which can thus be more easily included in institutional investors' portfolios. Again, such an explanation would not explain why even investors in countries with poor corporate governance are still home biased. Ultimately, it appears that the main variable most negatively and robustly correlated with the degree of home bias is "distance," suggesting that people invest more in countries with which they are more familiar.