The home bias of the poor: Terms of trade effects and portfolios across the wealth distribution

Tobias Broer

No 8811, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper documents how the share of foreign stocks in US household portfolios rises with the ratio of financial wealth to non-financial income. This is both because wealthier households are more likely to participate in foreign asset markets, and because portfolio shares of participants increase with financial wealth but decrease with non-financial income. A simple, standard two-country general equilibrium model shows that hedging of terms of trade movements and non-financial income risk produces non-trivial heterogeneity in portfolios across the wealth and income distribution within countries that is qualitatively in line with this evidence.

Keywords: Heterogeneous agents; Home bias; Portfolio choice; Terms of trade (search for similar items in EconPapers)
JEL-codes: D11 D31 E21 F36 G11 (search for similar items in EconPapers)
Date: 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP8811 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: The home bias of the poor: terms of trade effects and portfolios across the wealth distribution (2013)
Working Paper: The home bias of the poor: terms of trade effects and portfolios across the wealth distribution (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:8811

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8811

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().