International Diversification of Social and Private Risk: The US and Japan

Stephen Golub

No 955, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper concerns the gains from international trade in risky assets, with an application to the United States and Japan. I examine the role of international financial markets in diversifying the risks associated with the aggregate consumption opportunities of a nation (social risk) and the risks related to individual agents' consumption opportunities (private risk). The main empirical result is that international portfolio diversification between the United States and Japan leads to small reductions in social risk but large reductions in some private risks, especially for corporate profits.

Pages: 33 pages
Date: 1990-08
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Journal Article: International diversification of social and private risk: the U.S. and Japan (1994)
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