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American Economic Review Vol. 101 No. 7 2011

US International Equity Investment and Past and Prospective Returns

Stephanie E. Curcuru1; Charles R. Thomas1; Francis E. Warnock2; Jon Wongswan3

1 International Finance Division, Board of Governors of the Federal Reserve System, Washington DC 20551. · 2 Darden Business School, University of Virginia, Charlottesville, VA 22906, and National Bureau of Economic Research. · 3 Phatra Securities Public Company Limited, Bangkok 10310 Thailand, and Thammasat Business School, Thammasat University, 2 Prachan Road, Pranakorn, Bangkok 10200, Thailand.

Abstract

Counter to extant stylized facts, using newly available data on country allocations in US investors' foreign equity portfolios we find that (i) US investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and (ii) US investors increase portfolio weights on a country's equity market just prior to its strong performance, behavior inconsistent with an informational disadvantage. Over the past two decades, US investors' foreign equity portfolios outperformed a value-weighted foreign benchmark by 160 basis points per year. JEL: C58, G11, G15

DOI
10.1257/aer.101.7.3440
Volume
101
Issue
7
Pages
3440-3455
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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