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Linda L. Tesar, Ingrid M. Werner
NBER Working Paper No. 4611*
Issued in January 1994
NBER Program(s): AP
IFM
ITI
---- Abstract -----
This paper studies the cross-border transactions in equity by investors in Canada, Germany,Japan, the U.K. and the U.S. We find that investors from different countries make very different decisions about the allocation of their portfolio across markets. In contradiction to the notion that high variable transactions costs hinder international diversification, we find that the volume of gross equity flows vastly exceeds net equity flows and the turnover rate on foreign equity investments by some investors even exceeds domestic turnover rates. We also reject the hypothesis that U.S. investors follow the standard CAPM in allocating their global equity portfolio.
*Published: The Internationalization of Equity Markets, Jeffrey A. Frankel ed., pp. 185-216, (Chicago: University of Chicago Press: 1994).
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