Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43863
Authors: 
Harms, Philipp
Hoffmann, Mathias
Ortseifer, Christina
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper Series 1: Economic Studies 2010,24
Abstract: 
We show that including distribution costs into a general equilibrium model of international portfolio choice contributes to explaining the 'home bias' in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if agents have an incentive to hedge labor income risk by purchasing foreign equity. This is because the existence of a retail sector affects both the correlation of domestic returns with the domestic price level and the correlation between financial and nonfinancial income.
Subjects: 
International Financial Market Integration
International Risk Sharing
Home Bias
JEL: 
F41
G11
G15
ISBN: 
978-3-86558-665-0
Document Type: 
Working Paper

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