Financial Markets and International Risk Sharing

Martin Schmitz

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: Panel analysis of 20 industrial countries shows evidence for pro-cyclicality of capital gains on domestic stock markets - in particular over a medium term horizon. Thus, with cross-border ownership of portfolio equity investments, potential for international smoothing of domestic output fluctuations by means of the capital gains channel is found. Individual country analysis reveals substantial heterogeneity of cyclicality patterns. Evidence suggests that this cross-country variation can be explained by the level of economic development and the size of financial markets.

Date: 2007-11-09
New Economics Papers: this item is included in nep-fmk
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Related works:
Journal Article: Financial Markets and International Risk Sharing (2010)
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