The Impact of International Portfolio Composition on Consumption Risk Sharing

Nils Holinski (), Clemens Kool and Joan Muysken ()

No 11-20, Working Papers from Utrecht School of Economics

Abstract: Recent empirical work has shown that ongoing international financial integration facilitates cross-country consumption risk-sharing. These studies typically find that countries with high equity home bias exhibit relatively low international consumption risk sharing. We extend this line of research and demonstrate that it is not only a country’s equity home bias that prevents consumption risk sharing. In addition, the composition of a country’s foreign asset portfolio plays an important role. Using panel-data regression for a group of OECD countries over the period 1980-2007, we show that foreign investment bias has additional explanatory power for consumption risk sharing.

Keywords: international financial integration; foreign investment bias; geography of international investment; equity home bias; international portfolio diversification (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The impact of international portfolio composition on consumption risk sharing (2012)
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