International Equity Transactions and U.S. Portfolio Choice

46 Pages Posted: 21 Dec 2000 Last revised: 16 Aug 2010

See all articles by Linda L. Tesar

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

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Date Written: January 1994

Abstract

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.

Suggested Citation

Tesar, Linda L. and Werner, Ingrid M., International Equity Transactions and U.S. Portfolio Choice (January 1994). NBER Working Paper No. w4611. Available at SSRN: https://ssrn.com/abstract=253998

Linda L. Tesar (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
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Ingrid M. Werner

The Ohio State University - Fisher College of Business ( email )

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