Infrequent Random Portfolio Decisions in an Open Economy Model

• 成果类型: Article
• 署名作者: Bacchetta, Philippe; van Wincoop, Eric; Young, Eric R.
• 署名单位: University of Lausanne; Swiss Finance Institute (SFI); Centre for Economic Policy Research - UK; University of Virginia; National Bureau of Economic Research; Federal Reserve System - USA; Federal Reserve Bank - Cleveland
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdac054
• 发表日期: 2023
• 页码: 1125-1154
• 关键词: International Capital Flows; asset price dynamics; micro-evidence; returns; consumption; INFORMATION; projection; CHOICE; RISK

摘要

We introduce a portfolio friction in a two-country DSGE model where investors face a constant probability to make new portfolio decisions. The friction leads to a more gradual portfolio adjustment to shocks and a weaker portfolio response to changes in expected excess returns. We apply the model to monthly data for the US and the rest of the world for equity portfolios. We show that the model is consistent with a broad set of evidence related to portfolios, equity prices, and excess returns for an intermediate level of friction. The evidence includes portfolio inertia, limited sensitivity to expected excess returns, a significant impact of financial shocks, excess return predictability, and asset price momentum and reversal.