ON THE INTERNATIONALIZATION OF PORTFOLIOS
Portfolio theory has been an important component of open economy macroeconomic models. In such models, it is essential to distinguish between several categories of assets, both foreign and domestic, and to specify their demands and supplies. This framework has become increasingly relevant. Movements...
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| Veröffentlicht in: | Oxford economic papers 1992-10, Vol.44 (4), p.533-565 |
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| creator | BRAINARD, WILLIAM C. TOBIN, JAMES |
| description | Portfolio theory has been an important component of open economy macroeconomic models. In such models, it is essential to distinguish between several categories of assets, both foreign and domestic, and to specify their demands and supplies. This framework has become increasingly relevant. Movements of capital across regional and national boundaries and currencies have exploded in volume, thanks to the dismantling of currency and exchange controls and other financial regulations and to revolutionary economies in technologies of communication and transaction. The globalization of financial markets was stimulated by the floating-exchange rate regime established in 1973. Simulations show how opportunities for international diversification affect rates of return on 2 assets: equity claims and risk premia. Optimal portfolio diversification lowers risk premia, as would be expected. But it may seem surprising that it usually also raises the risk-free rate by more than the reduction in the risk of premium, so the rate of return on foreign equity also rises. |
| doi_str_mv | 10.1093/oxfordjournals.oep.a042065 |
| format | Article |
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| ispartof | Oxford economic papers, 1992-10, Vol.44 (4), p.533-565 |
| issn | 0030-7653 1464-3812 |
| language | eng |
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| source | Jstor Complete Legacy; Oxford University Press Journals Digital Archive Legacy; Periodicals Index Online |
| subjects | Assets Currency transactions Economic models Economic theory Endowments Equity Financial portfolios Globalization International finance International trade Internationalization Investment return rates Investment risk Portfolio diversification Portfolio management Regulation of financial institutions Risk aversion Risk premiums Terms of trade Wealth |
| title | ON THE INTERNATIONALIZATION OF PORTFOLIOS |
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