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Shareholders of a Regional Bell Operating Company (RBOC) tend to live in the area which it serves, and an RBOC's customers tend to hold its shares rather than other RBOCs' equity. The geographic bias of the RBOC investors is closely related to the general tendency of households' portfolios to be concentrated, of employees' tendency to own their employers' stocks in their retirement accounts, and to the home country bias in the international arena. Together, these phenomena provide compeling evidence that people invest in the familiar while often ignoring the principles of portfolio theory.
Gur Huberman (Sun,) studied this question.