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

See all articles by Dimitris Christelis

Dimitris Christelis

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); Netspar

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

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Date Written: April 11, 2011

Abstract

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

Christelis, Dimitrios and Georgarakos, Dimitris, Investing at Home and Abroad: Different Costs, Different People? (April 11, 2011). University of Salerno, CSEF Working Paper No. 188, Available at SSRN: https://ssrn.com/abstract=1086040 or http://dx.doi.org/10.2139/ssrn.1086040

Dimitrios Christelis (Contact Author)

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Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research ( email )

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Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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