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Home Bias and International Risk Sharing: Twin Puzzles Separated at Birth

Bent Sorensen, Yi-Tsung Wu, Oved Yosha and Yu Zhu

No 5113, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that international home bias in bond and equity holdings declined during the late 1990s at the same time as international risk sharing increased. Also, countries with less home bias, on average, tended to obtain more risk sharing in international markets. Using panel data estimations, we demonstrate that less home bias is associated with more international risk sharing when both cross-sectional and time-series dimensions are taken into account. This indicates that lack of risk sharing and international home bias are closely related empirical phenomena.

Keywords: consumption smoothing; income smoothing; international portfolio diversification (search for similar items in EconPapers)
JEL-codes: F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2005-06
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Journal Article: Home bias and international risk sharing: Twin puzzles separated at birth (2007) Downloads
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