Re: The value of local knowledge
The main driving force (as Tim acknowledges towards the end of the article) is that local banks, insurers etc. have liabilities denominated in the local currency. Investing in 'foreign' stocks carries risks of both stock movement and currency movements.
We had an interesting example of this when the eurozone was created. German banks, fed up with getting tiny returns on their holdings of German bonds found that they could get much higher returns on Greek government bonds denominated in what was now the same currency. What could possibly go wrong?
The German government-inspired process of kicking the Greek problem a few months down the road by throwing money at it, was precisely to give time for their banks to untangle their Greek assets without becoming insolvent. Now that has been achieved, the Greeks can go swivel.
Biting the hand that feeds IT
