In addition to the irrational bias, I think there is also a rational case for some home bias, assuming that you are planning to stay in the same place.
Assume my aim is to preserve my quality of life in the place I am living.
Part of quality of life is how much purchasing power I have compared to my neighbours; if they all get rich then the price of goods and services will rise, fancier restaurants will open locally and I will feel poorer if I have less spending power than them (both whiny keeping-up-with-the-Jones and rational market forces).
If I am in Freemont and invest in a global tracker, I expect global average returns; if Gerber does worse than the tracker, my spending power will go up relative to my neighbours; if Gerber does better then my spending power will go down.
If the drop in spending power means that I can't finance the life I want in Freemont, then I should consider putting more into Gerber. It's a less-stupid version of people who put into their family/friends' lotto pool - it's not that they think it will do better, but that they need to hedge the risk of it doing better (/the friends winning the lotto) and being priced out of their own market as a result.