New Evidence on the US Excess Return on Foreign Portfolios

Carol C. Bertaut, Stephanie E. Curcuru, Ester Faia and Pierre-Olivier Gourinchas
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Carol C. Bertaut: https://www.federalreserve.gov/econres/carol-bertaut.htm
Stephanie E. Curcuru: https://www.federalreserve.gov/econres/stephanie-e-curcuru.htm

No 1398, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We provide new estimates of the return on US external claims and liabilities using confidential, high-quality, security-level data. The excess return is positive on average, since claims are tilted toward higher-return equities. The excess return is large and positive in normal times but large and negative during global crises, reflecting the global insurance role of the US external balance sheet. Controlling for issuer's nationality, we find that US investors have a larger exposure to equity issued by Asia-headquartered corporations than reported in the aggregate statistics. Finally, equity portfolios are concentrated in 'superstar' firms, but for US liabilities foreign holdings are less concentrated than the overall market.

Keywords: Capital flows; Cross-border investment; Exorbitant privilege (search for similar items in EconPapers)
JEL-codes: F21 F30 F32 (search for similar items in EconPapers)
Date: 2024-11-13
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https://www.federalreserve.gov/econres/ifdp/files/ifdp1398.pdf (application/pdf)

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Working Paper: New Evidence on the US Excess Return on Foreign Portfolios (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1398

DOI: 10.17016/IFDP.2024.1398

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