Investing at Home and Abroad: Different Costs, Different People?
University of Salerno, CSEF Working Paper No. 188
52 Pages Posted: 6 Mar 2008 Last revised: 13 Apr 2011
Date Written: April 11, 2011
We investigate US households’ direct investment in stocks, bonds and liquid accounts and their foreign counterparts, in order to identify the different participation hurdles affecting asset investment domestically and overseas. To this end, we estimate a trivariate probit model with three further selection equations that allows correlations among unobservables of all possible asset choices. Our results point to the existence of a second hurdle that stock owners need to overcome in order to invest in foreign stocks. On the other hand, we find little evidence for additional pecuniary or informational costs associated with investment in foreign bonds and liquid accounts.
Keywords: Foreign assets, household finance, stockholding, multivariate probit, simulated maximum likelihood, selection.
JEL Classification: C35, D14, G11, G15
Suggested Citation: Suggested Citation