The International Diversification Puzzle Is Not As Bad As You Think

Author : Jonathan Heathcote
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.14/5 ( download)

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Download or read book The International Diversification Puzzle is Not as Bad as You Think written by Jonathan Heathcote and published by . This book was released on 2007 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract : In simple one-good international macro models, the presence of non-diversifiable labor income risk means that country portfoliosshould be heavily biased toward foreign assets. The fact that the opposite pattern of diversification is observed empirically constitutes the international diversification puzzle. We embed a portfolio choice decision in a frictionless two-country, two-good version of the stochastic growth model. In this environment, which is a workhorse for international business cycle research, we derive a closed-form expression for equilibrium country portfolios. These are biased towards domestic assets, as in the data. Home bias arises because endogenous international relative price fluctuations make domestic stocks a good hedge against non-diversifiable labor income risk. We then use our our theory to link openness to trade to the level of diversification, and find that it offers a quantitatively compelling account for the patterns of international diversification observed across developed economies in recent years.

Author : Mr.Charles Engel
Publisher : International Monetary Fund
ISBN 13 : 1451871597
Total Pages : 49 pages
Book Rating : 4.93/5 ( download)

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Download or read book The International Diversification Puzzle when Goods Prices Are Sticky written by Mr.Charles Engel and published by International Monetary Fund. This book was released on 2009-01-01 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some nominal goods prices are sticky. Trade in these assets achieves the same allocations as trade in a complete set of nominal state-contingent claims in our linearized model. When there is a high degree of price stickiness, we show that not much equity diversification is required to replicate the complete-markets equilibrium when agents are able to hedge foreign exchange risk sufficiently. Moreover, temporarily sticky nominal goods prices can have large effects on equity portfolios even when dividend processes are very persistent.

Author : Tatsushi Okuda
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.30/5 ( download)

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Download or read book Geoeconomic Fragmentation and International Diversification Benefits written by Tatsushi Okuda and published by International Monetary Fund. This book was released on 2024-03-08 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010) to quantify the loss of international diversification benefits for major advanced economies, which have a significant presence in international financial markets, under geoeconomic fragmentation. We perform counterfactual simulations under different hypothetical fragmentation scenarios in which these economies are unable to trade with geopolitically distant countries, as measured by voting disagreement on foreign policy issues at the United Nations General Assembly meetings during 2012-2021. The simulation results imply a potentially significant loss of international diversification benefits of financial openness for the considered advanced economies by limiting trading to partner countries that are geopolitical allies with highly synchronized business cycles.

Author : Mr.Sakai Ando
Publisher : International Monetary Fund
ISBN 13 : 1513509829
Total Pages : 33 pages
Book Rating : 4.22/5 ( download)

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Download or read book International Financial Connection and Stock Return Comovement written by Mr.Sakai Ando and published by International Monetary Fund. This book was released on 2019-08-22 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.

Author : Gerard Caprio
Publisher : Academic Press
ISBN 13 : 0123978750
Total Pages : 547 pages
Book Rating : 4.52/5 ( download)

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Download or read book Handbook of Safeguarding Global Financial Stability written by Gerard Caprio and published by Academic Press. This book was released on 2012-11-27 with total page 547 pages. Available in PDF, EPUB and Kindle. Book excerpt: Political and social forces exert pressure on our globalized economy in many forms, from formal and informal policies to financial theories and technical models. Our efforts to shape and direct these forces to preserve financial stability reveal much about the ways we perceive the financial economy. The Handbook of Safeguarding Global Financial Stability examines our political economy, particularly the ways in which these forces inhabit our institutions, strategies, and tactics. As economies expand and contract, these forces also determine the ways we supervise and regulate. This high-level examination of the global political economy includes articles about specific countries, crises, and international systems as well as broad articles about major concepts and trends.. Substantial articles by top scholars sets this volume apart from other information sources Diverse international perspectives result in new opportunities for analysis and research Rapidly developing subjects will interest readers well into the future

Author : Erokhin, Vasily
Publisher : IGI Global
ISBN 13 : 1522504524
Total Pages : 407 pages
Book Rating : 4.28/5 ( download)

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Download or read book Global Perspectives on Trade Integration and Economies in Transition written by Erokhin, Vasily and published by IGI Global. This book was released on 2016-06-16 with total page 407 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the era of globalization, foreign trade has an immense impact upon modern economies. To succeed in the global marketplace, sustainable development in trade practices is an imperative goal for countries to reach. Global Perspectives on Trade Integration and Economies in Transition is an authoritative reference source for the latest research on the dynamics of transitional economies and how certain obstacles can disrupt the effectiveness of the transition process. Highlighting the value of trade incorporation at the national and international levels, this book is ideally designed for researchers, professionals, government officials, policy makers, and upper-level students interested in the intersection of globalization, trade, and international economics.

Author : Roger Walton Ferguson
Publisher : Centre for Economic Policy Research
ISBN 13 : 1898128979
Total Pages : 217 pages
Book Rating : 4.77/5 ( download)

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Download or read book International Financial Stability written by Roger Walton Ferguson and published by Centre for Economic Policy Research. This book was released on 2007 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt: This new Geneva Report examines the main threats to international financial stability, focusing on the implications of major changes that have occurred in the global financial system in the past two decades.

Author : Kavous Ardalan
Publisher : Routledge
ISBN 13 : 1000001431
Total Pages : 230 pages
Book Rating : 4.33/5 ( download)

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Download or read book Equity Home Bias in International Finance written by Kavous Ardalan and published by Routledge. This book was released on 2019-05-17 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive and critical analysis of research outcomes on the equity home bias puzzle – that people overinvest in domestic stocks relative to the theoretically optimal investment portfolio. It introduces place attachment – the bonding that occurs between individuals and their meaningful environments – as a new explanation for equity home bias, and presents a philosophically multi-paradigmatic view of place attachment. For the first time, a comprehensive and up-to-date review of the extant literature is provided, demonstrating that place attachment is a contributing factor to 22 different topics in which variations of home bias are present. The author also analyses the social-psychological underpinnings of place attachment, and considers the effect of multi-culturalism on the future of equity home bias. The book’s unique approach discusses the issues in conceptual terms rather than through data and statistical methods. This multi- and inter-disciplinary book is an invaluable resource for graduate students and researchers interested in economics, finance, philosophy, and/or methodology, introducing them to a new line of research.

Author : International Monetary Fund
Publisher : International Monetary Fund
ISBN 13 : 1451874243
Total Pages : 47 pages
Book Rating : 4.42/5 ( download)

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Download or read book Elasticity Optimism written by International Monetary Fund and published by International Monetary Fund. This book was released on 2009-12-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate substitutability is a weighted average of good-specific elasticities, which in general cannot be inferred from aggregated data. We identify structurally the substitutability in US goods using multilateral trade data. We impose homogeneity, and find an aggregate elasticity similar in value to conventional macroeconomic estimates. It is more than twice larger with sectoral heterogeneity. We discuss the implications in various areas of international economics.

Author :
Publisher : Academic Press
ISBN 13 : 012405899X
Total Pages : 807 pages
Book Rating : 4.96/5 ( download)

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Download or read book The Evidence and Impact of Financial Globalization written by and published by Academic Press. This book was released on 2012-12-31 with total page 807 pages. Available in PDF, EPUB and Kindle. Book excerpt: The sharp realities of financial globalization become clear during crises, when winners and losers emerge. Crises usher in short- and long-term changes to the status quo, and everyone agrees that learning from crises is a top priority. The Evidence and Impact of Financial Globalization devotes separate articles to specific crises, the conditions that cause them, and the longstanding arrangements devised to address them. While other books and journal articles treat these subjects in isolation, this volume presents a wide-ranging, consistent, yet varied specificity. Substantial, authoritative, and useful, these articles provide material unavailable elsewhere. Substantial articles by top scholars sets this volume apart from other information sources Rapidly developing subjects will interest readers well into the future Reader demand and lack of competitors underline the high value of these reference works