Human capital and international portfolio diversification: A reappraisal

• 成果类型: Article; Proceedings Paper
• 署名作者: Bretscher, Lorenzo; Julliard, Christian; Rosa, Carlo
• 署名单位: University of London; London School Economics & Political Science; University of London; London School Economics & Political Science; Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2015.12.007
• 发表日期: 2016
• 页码: S78-S96
• 关键词: Home country bias; incomplete markets; International diversification puzzle; Non-traded human capital; Hedging human capital; Optimal portfolio choice

摘要

We study the implications of human capital hedging for international portfolio choice. First, we document that, at the household level, the degree of home country bias in equity holdings is increasing in the labor income to financial wealth ratio. Second, we show that a heterogeneous agent model in which households face short selling constraints and labor income risk, calibrated to match both micro and macro labor income and asset returns data, can both rationalize this finding and generate a large aggregate home country bias in portfolio holdings. Third, we find that the empirical evidence supporting the belief that the human capital hedging motive should skew domestic portfolios toward foreign assets, is driven by an econometric misspecification rejected by the data. (C) 2016 The Authors. Published by Elsevier B.V.