International Equity Transactions and U.S. Portfolio Choice
Linda L. Tesar
University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)
Ingrid M. Werner
The Ohio State University - Fisher College of Business
NBER Working Paper No. w4611
This paper studies the cross-border transactions in equity by investors in Canada, Germany,Japan, the U.K. and the U.S. We find that investors from different countries make very different decisions about the allocation of their portfolio across markets. In contradiction to the notion that high variable transactions costs hinder international diversification, we find that the volume of gross equity flows vastly exceeds net equity flows and the turnover rate on foreign equity investments by some investors even exceeds domestic turnover rates. We also reject the hypothesis that U.S. investors follow the standard CAPM in allocating their global equity portfolio.
Number of Pages in PDF File: 46working papers series
Date posted: December 21, 2000
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