New Evidence on the US Excess Return on Foreign Portfolios

Carol C. Bertaut, Stephanie Curcuru, Ester Faia and Pierre-Olivier Gourinchas

No 2024/241, IMF Working Papers from International Monetary Fund

Abstract: We provide new estimates of the return on US external claims and liabilities using confidential, high-quality, security-level data. The excess return is positive on average, since claims are tilted toward higher return equities. The excess return is large and positive in normal times but large and negative during global crises, reflecting the global insurance role of the US external balance sheet. Controlling for issuer’s nationality, we find that US investors have a larger exposure to equity issued by Asia-headquartered corporations than reported in the aggregate statistics. Finally, equity portfolios are concentrated in ’superstar’ firms, but for US liabilities foreign holdings are less concentrated than the overall market.

Keywords: Exorbitant privilege; excess return; portfolio composition; crises; offshore centers; superstar firms; equity portfolio; higher-return equities; equity share; Bonds; Exchange rates; Securities; Global financial crisis of 2008-2009; Global; Caribbean (search for similar items in EconPapers)
Pages: 30
Date: 2024-11-22
New Economics Papers: this item is included in nep-rmg
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Working Paper: New Evidence on the US Excess Return on Foreign Portfolios (2024)
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