The determinants of the volatility of returns on cross-border asset holdings

Faruk Balli, Syed Abul Basher and Faisal Rana

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Using both panel and cross-sectional models for 28 industrialized countries observed from 2001 to 2009, we report a number of findings regarding the determinants of the volatility of returns on cross-border asset holdings (i.e., equity and debt). Greater portfolio concentration and an increase in assets held in emerging markets lead to an elevation in earning volatility, whereas more financial integration and a greater share held in Organization for Economic Cooperation and Development countries and by the household sector cause a reduction in the return volatility. Larger asset holdings by offshore financial corporations and non-bank financial institutions cause higher market volatility, although they affect volatility in the equity and bond markets in the opposite way. Overall, both panel and cross-sectional estimations provide very similar results (albeit of different magnitude) and are robust to the endogeneity problem.

Keywords: Asset return volatility; financial integration; international portfolio choice; asset holdings; endogeneity bias (search for similar items in EconPapers)
JEL-codes: E44 F36 G15 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-01
New Economics Papers: this item is included in nep-fmk, nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: The determinants of the volatility of returns on cross-border asset holdings (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-01

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