International diversification and industry-related labor income risk

Carolina Fugazza (), Maela Giofre' () and Giovanna Nicodano

International Review of Economics & Finance, 2011, vol. 20, issue 4, 764-783

Abstract: Do equity markets help diversifying away industry-related labor income risk? This paper reconsiders the hedging role of stock markets by focusing on international equity diversification, rather than domestic asset allocation, and on industry wage, rather than individual labor income. We compare industry-based portfolio holdings to the one that is optimal for an investor endowed with the average home-country labor income. Our results resurrect the role of equities in hedging wage risk by uncovering remarkable heterogeneity across industries within each investing country. Our analysis also delivers insights concerning the role of occupational pension funds in designing optimal portfolios for their members.

Keywords: Optimal; portfolio; choice; International; diversification; Industry-specific; human; capital; risk; Occupational; pension; funds (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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Working Paper: International diversification and industry-related labor income risk (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:20:y:2011:i:4:p:764-783

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