Risk sharing, finance, and institutions in international portfolios

• 成果类型: Article
• 署名作者: Fratzscher, Marcel; Imbs, Jean
• 署名单位: European Central Bank; University of Geneva; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.12.007
• 发表日期: 2009
• 页码: 428-447
• 关键词: Risk sharing; diversification; portfolio choice; Financial integration; Cross-border investment

摘要

We develop a standard model to show how transaction costs in international investment affect conventional tests of consumption risk sharing, both in a multilateral and a bilateral setting. We implement the tests in a novel international data set on bilateral holdings of equity, bonds, foreign direct investment (FDI) and bank loans. In our data, high foreign capital holdings are associated with international consumption risk sharing as implied by our theory. This is especially true of investment in equity or bonds, but not of foreign direct investment or bank loans. In our model, the implication is that transaction costs are higher for FDI and international loans. The discrepancy could reflect technological differences, but also the prospect of expropriation, perhaps most stringent for FDI or loans. We argue that expropriation risk is endogenous to both the borrower's institutions and its openness to international markets. The detrimental impact of poor institutions is muted in open economies , where the possibility of subsequent exclusion from world markets deters expropriation of foreign capital. We show the implied effects of institutions prevail in both the cross-section of consumption risk sharing and in observed international investment patterns. (C) 2009 Elsevier B.V. All rights reserved.