International Portfolio Allocation under Model Uncertainty

• 成果类型: Article
• 署名作者: Benigno, Pierpaolo; Nistico, Salvatore
• 署名单位: Luiss Guido Carli University; Sapienza University Rome
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.4.1.144
• 发表日期: 2012
• 页码: 144-189
• 关键词: diversification puzzle; HOME BIAS; long-run; RISK; prices; equilibrium; consumption; returns; CHOICE; rules

摘要

This paper revisits an old argument, hedging real exchange rate risk, as an explanation of the international home bias in equity. In a dynamic model, the relevant risk to be hedged is the long-run risk as opposed to the short-run risk. Domestic equity is indeed a good hedge with respect to long-run real-exchange-rate risk. Two new frameworks are able to explain a large share of the observed US home bias: a model with Hansen-Sargent preferences in which agents fear model misspecification and a model with Epstein-Zin preferences. These two models are also immune to the risk-free rate puzzle.