Japanese and U.S. Cross-Border Common Stock Investments
18 Pages Posted: 14 Jul 2000
Date Written: March 1991
Abstract
At the end of 1989, Japanese investors held just over 1% of the U.S. stock market, while U.S. investors held less than 1% of the Tokyo market. This pattern of very limited cross-holding has persisted for nearly two decades, despite the diversification gains from cross-border investment. None of the standard explanations for limited international equity holding, such as capital controls on Japanese investors or limits on the international exposure of institutional portfolios, appears satisfactory. To justify these patterns, investors in both the United States and Japan must believe, inconsistently, that expected returns are substantially higher in their own market than in foreign markets.
JEL Classification: 52,31
Suggested Citation: Suggested Citation
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