Abstract
Recent empirical work has shown that ongoing international financial integration
facilitates cross-country consumption risk-sharing. These studies typically find that
countries with high equity home bias exhibit relatively low international consumption
risk sharing. We extend this line of research and demonstrate that it is not only a
country’s equity home bias that prevents consumption risk sharing. In addition, the
composition of a country’s foreign asset portfolio plays an important role. Using
panel-data regression for a group of OECD countries over the period 1980-2007, we
show that foreign investment bias has additional explanatory power for consumption
risk sharing.
facilitates cross-country consumption risk-sharing. These studies typically find that
countries with high equity home bias exhibit relatively low international consumption
risk sharing. We extend this line of research and demonstrate that it is not only a
country’s equity home bias that prevents consumption risk sharing. In addition, the
composition of a country’s foreign asset portfolio plays an important role. Using
panel-data regression for a group of OECD countries over the period 1980-2007, we
show that foreign investment bias has additional explanatory power for consumption
risk sharing.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 31 |
| Publication status | Published - 2011 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 20 |
| Volume | 11 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- international financial integration
- foreign investment bias
- geography of international investment
- equity home bias
- international portfolio diversification