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Monday, July 27, 2020 | History

2 edition of Consumption, stock returns, and the gains from international risk-sharing found in the catalog.

Consumption, stock returns, and the gains from international risk-sharing

Karen K. Lewis

Consumption, stock returns, and the gains from international risk-sharing

by Karen K. Lewis

  • 98 Want to read
  • 25 Currently reading

Published by National Bureau of Economic Research in Cambridge, Mass .
Written in English

    Subjects:
  • Consumption (Economics) -- Econometric models.,
  • Rate of return -- Econometric models.,
  • Investments, Foreign.

  • Edition Notes

    StatementKaren K. Lewis.
    SeriesNBER working paper series -- no.5410
    ContributionsNational Bureau of Economic Research.
    The Physical Object
    Pagination30,[10]p. :
    Number of Pages30
    ID Numbers
    Open LibraryOL17329961M

      For book‐to‐market portfolios (bm1, bm2, and bm3), the effect of stock market integration on returns is statistically significantly stronger for mid book‐to‐market firms (bm2). With respect to momentum (m1, m2, and m3), stocks with low momentum (m1) seem to benefit more, and the difference is statistically significant with respect to Cited by: 3. Stock-Flow relationship I Stock position Z evolves according to Z t = Z t1 + FLOW Zt + VAL Zt + OTHER Zt I FLOW Zt is the ow term from the balance of payments I V AL Zt is the valuation terms that includes changes in Z due to changes in market prices, exchange rates and write-downs I OTHER Zt is the residual terms that arises due to gaps between survey data and.

    Cumby, Robert E. "Consumption Risk and International Equity Returns: Some Empirical Evidence," Journal of International Money and Finance 9, June , Korajczyk, Robert A. and Claude J. Viallet, "An Empirical Investigation of International Asset Pricing" The Review of Financial Studies, 2, global risk sharing: “The Significance of the Market Portfolio,” Review of Fi-nancial Studies 13(2) ()–29; “World Income Components: Measuring and Exploiting Risk Sharing Opportunities,” American Economic Review, 91(4) (): –54; and “Defining Residual Risk-Sharing Opportunities:Cited by:

    Sample evidence about the predictability of monthly stock returns is considered from the perspective of a risk-averse Bayesian investor who must allocate funds between stocks and cash. The investor uses the sample evidence to update prior beliefs about the parameters in a regression of stock returns on a set of predictive variables. investors and there are bene ts from global portfolio diversi cation and risk sharing. Risk sharing decreases expected returns, leading to a lower cost of equity (Bekaert et al., ). When segmented markets become integrated, stock prices have been shown to grow, re ecting lower levels of risk and increased demand for local stocks (Stulz.


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Consumption, stock returns, and the gains from international risk-sharing by Karen K. Lewis Download PDF EPUB FB2

The structure of this paper is as follows. in section 1, I describe the welfare gain function. In section 2, I use stock returns for the G-7 countries to examine stock returns using standard mean- variance analysis. In section 3, I develop a single general equilibrium framework for examining risk-sharing based upon consumption.

I then incorporate stock return data to calculate general. Whether this lack of diversification is important depends on the potential gains from risk-sharing. General equilibrium models and consumption data tend to find that the costs are small, typically less than % of permanent consumption.

On the other hand, stock returns imply gains that are several hundred times larger. Consumption, stock returns, and the gains from international risk-sharing. Cambridge, MA: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Karen K Lewis; National Bureau of Economic Research.

Get this from a library. Consumption, stock returns, and the gains from international risk-sharing. [Karen K Lewis; National Bureau of Economic Research.] -- Abstract: Standard theoretical models predict that domestic residents should diversify their portfolios into foreign assets much more than observed in practice.

Whether this lack of diversification. Estimates of the gains to international risk-sharing based upon stock returns tend to find dramatically higher gains than do estimates from consumption. Stock returns are defined as one-year capital gains plus dividend yields: R t + 1 = p t + 1 + d t p t where p t denotes the price of a share and d t the dividends per share at time t.

We identify firm-level returns with the returns of the firm’s common by: Karen K. Lewis, "Consumption, Stock Returns, and the Gains from International Risk-Sharing" Standard theoretical models predict that domestic residents should diversify their portfolios into foreign assets much more than observed in practice.

Whether this lack of diversification is important depends on the potential gains from risk-sharing. Financial Markets and International Risk Sharing Financial Markets and International Risk Sharing Schmitz, Martin Panel analysis of 21 industrial countries shows evidence for pro-cyclicality of capital gains on domestic stock markets over a medium term horizon.

Thus, with cross-border ownership of portfolio equity investments, Author: Schmitz, Martin. (2) It generates large unexpected capital gains for equity holders, especially in the s. (3) The risk-free rate and the housing collateral ratio are strongly positively correlated at low frequencies.

(4) The model mimics the slow decline in the volatility of. A second issue raised by the growth in international financial trade corresponds to the decisions of domestic investors. An implicit assumption behind many economic models is that investors will take advantage of potential gains in returns and risk-sharing through integrated capital Size: 3MB.

This model feature gives rise to some risk being non-diversifiable, and lets the authors assess the mitigating role of a firm's systematic risk or the market risk premium on the relation between capital gains taxes and expected returns due to risk sharing with the by: 2.

International Diversification of Investment Portfolios. American Economic Review, Lewis, K., (). What (',an Explain the Apparent Lack of International Consumption Risk-Sharing. University of Pennsylvania Working Paper. Lewis, K., (). Why Do Consumption and Stock Returns Suggest Such Different Costs of Imperfect Risk Sharings?Cited by:   Panel analysis of 21 industrial countries shows evidence for pro-cyclicality of capital gains on domestic stock markets over a medium term horizon.

Thus, with cross-border ownership of portfolio equity investments, potential for hedging against domestic output fluctuations by means of the capital gains channel of foreign liabilities is found. Individual Cited by: Martin Lettau and Sydney Ludvigson (3) find that a conditional capital asset pricing model (CAPM) and a conditional consumption-based model can explain the cross-section of stock returns just as well as the Fama-French model which is based on size and book-to-market portfolios.

In "bad times," measured by the consumption-to-wealth ratio, value. History. Financial integration is believed to date back to the s and was briefly interrupted at the start of the French revolution (Neal, ).At the end of the 17th century, the world’s dominant commercial empire was the Dutch Republic with the most important financial center located in Amsterdam where Banking, foreign exchange trading, stock trading and bullion trading were.

consumption risk and must rely on imperfect risk sharing mechanisms. Given the nature of partial insurance, welfare gains exist from further consumption smoothing. However, these gains are likely underestimated when focussing solely on the ex post consequences of income shocks.

A separate literature has consistently documented. Lewis, Karen K., and Edith X. Liu (). "Disaster Risk and Asset Returns: An International Perspective," Journal of International Economics, vol.pp. S " Disaster Risk and Asset Returns: An International Perspective," International Finance Discussion Papers In simple terms, risk is the possibility of something bad happening.

Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environment), often focusing on negative, undesirable consequences.

Many different definitions have been proposed. The international standard. 1 Introduction. An extensive literature in finance has been investigating cross-sectional differences in stock returns across firms, assets, or portfolios, identifying several variables driving returns differentials.

1 However, existing explanations of the cross section of returns overlooked the role of the international status of the firm. About half of the manufacturing firms publicly listed.

Complete markets and perfect risk sharing. Non traded risk. Gains from trade and law of comparative advantages in international finance: which country exports assets on average.

Determinants of the current account. First and second order stochastic dominance. Global Imbalances. ** OR chapter 5 page (, ). We develop a methodology for estimating bias-corrected premium estimates from cross-sectional regressions of individual stock returns on time-varying conditional betas.

For a comprehensive sample of stocks over the post-war period from throughwe find fairly consistent evidence of a positive risk premium on the size factor, but.A Cross-sectional Relation between Stock Returns and the Volatility of Liquidity 1 Testing Methodology and Data We follow the methodology of CSA, initially developed by Brennan, Chordia, and Sub-rahmanyan ().

It allows us to test whether many difierent stock characteristics are related to stock returns, using the full cross section of all.Start studying Macroeconomics Chapters Learn vocabulary, terms, and more with flashcards, games, and other study tools.

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear: most likely to be productive Suppose Sarah Palin buys a book in Alaska this morning for $