Article ID Journal Published Year Pages File Type
5066307 European Economic Review 2017 18 Pages PDF
Abstract

This paper documents how the share of foreign stocks in US household portfolios rises with the ratio of financial wealth to non-financial income. This is both because wealthier households are more likely to participate in foreign asset markets, and because portfolio shares of participants increase with financial wealth but decrease with non-financial income. A simple, standard two-country general equilibrium model shows that hedging of terms of trade movements and non-financial income risk produces non-trivial heterogeneity in portfolios across the wealth and income distribution within countries that is qualitatively in line with this evidence.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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