Hedging Against the Government: A Solution to the Home Asset Bias Puzzle

• 成果类型: Article
• 署名作者: Berriel, Tiago C.; Bhattarai, Saroj
• 署名单位: Getulio Vargas Foundation; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.5.1.102
• 发表日期: 2013
• 页码: 102-134
• 关键词: international diversification puzzle; spending shocks; RISK; prices; TRADE; deficits; MARKETS; sticky; cycles

摘要

We explain why international nominal bonds and equity portfolios are biased domestically. In our model, holding domestic government nominal debt provides a hedge against shocks to bond returns and the impact on taxes they induce. For this result, only two features are essential: nominal risk and taxes only on domestic agents. A third feature explains domestically biased equity holdings: government spending falls on domestic goods. Then, an increase in government spending raises the returns on domestic equity, providing a hedge against the subsequent increase in taxes. A calibrated version of the model predicts asset holdings that quantitatively match the data.