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Trade in Risky Assets

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  • Svensson, Lars E O

Abstract

A theory of the international trade pattern in risky assets is developed by applying the law of comparative advantage to asset trade. According to this l aw, there is a tendency for a country to import assets that have rela tively high autarky prices. It is examined how autarky prices are aff ected by international differences in stochastic properties of output /endowments, the rate of time preference, the degree of risk aversion , and subjective beliefs, and how such differences predict overall ca pital account deficits or surpluses as well as the composition of the capital account into trade in specific risky assets. Copyright 1988 by American Economic Association.

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  • Svensson, Lars E O, 1988. "Trade in Risky Assets," American Economic Review, American Economic Association, vol. 78(3), pages 375-394, June.
  • Handle: RePEc:aea:aecrev:v:78:y:1988:i:3:p:375-94
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    Cited by:

    1. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    2. Portes, Richard & Rey, Hélène, 2000. "The Determinants of Cross-Border Equity Flows: The Geography of Information," Center for International and Development Economics Research, Working Paper Series qt51w4v95p, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    3. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    4. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, vol. 64(2), pages 335-361, December.
    5. Maurico Obstfeld, 2004. "External adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(4), pages 541-568, December.
    6. Maurice Obstfeld, 1993. "International Capital Mobility in the 1990s," NBER Working Papers 4534, National Bureau of Economic Research, Inc.
    7. Vittorio Grilli & Nouriel Roubini, 1989. "Financial Integration, Liquidity and Exchange Rates," NBER Working Papers 3088, National Bureau of Economic Research, Inc.
    8. Saif Al-Abri, Almukhtar, 2014. "How does terms-of-trade behavior shape international financial integration in primary-commodity exporting economies?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 335-353.
    9. Karen K. Lewis, 1996. "Consumption, Stock Returns, and the Gains from International Risk-Sharing," NBER Working Papers 5410, National Bureau of Economic Research, Inc.
    10. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    11. Stepanchuk, Serhiy & Tsyrennikov, Viktor, 2015. "Portfolio and welfare consequences of debt market dominance," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 89-101.
    12. Matteo Maggiori, 2017. "Financial Intermediation, International Risk Sharing, and Reserve Currencies," American Economic Review, American Economic Association, vol. 107(10), pages 3038-3071, October.
    13. Martin, Philippe & Rey, H., 2000. "Financial integration and asset returns," European Economic Review, Elsevier, vol. 44(7), pages 1327-1350, June.
    14. Philip Lane, 2001. "Do international investment income flows smooth income?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(4), pages 714-736, December.
    15. Tesar, Linda L., 1995. "Evaluating the gains from international risksharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 95-143, June.
    16. Alessandro Ferrari & Anna Rogantini Picco, 2016. "International Risk Sharing in the EMU," Working Papers 17, European Stability Mechanism.
    17. Hanson, James A., 1992. "Opening the capital account : a survey of issues and results," Policy Research Working Paper Series 901, The World Bank.
    18. Alejandro Cuñat & Christian Fons-Rosen, 2013. "Relative Factor Endowments And International Portfolio Choice," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 166-200, February.
    19. Ramondo, Natalia & Rappoport, Veronica, 2010. "The role of multinational production in a risky environment," Journal of International Economics, Elsevier, vol. 81(2), pages 240-252, July.
    20. Lane, Philip R., 2000. "International investment positions: a cross-sectional analysis," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 513-534, August.
    21. Steven J. Davis & Jeremy Nalewaik & Paul Willen, 2000. "On the Gains to International Trade in Risky Financial Assets," NBER Working Papers 7796, National Bureau of Economic Research, Inc.
    22. Karen K. Lewis, 1996. "Consumption, stock returns, and the gains from international risk-sharing," Working Papers 96-6, Federal Reserve Bank of Philadelphia.
    23. Paul S. Willen, 2004. "Incomplete markets and trade," Working Papers 04-8, Federal Reserve Bank of Boston.
    24. Devereux, Michael B. & Min Lee, Khang, 1999. "Endogenous trade policy and the gains from international financial markets," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 35-59, February.
    25. Richard Portes & =20 H=E9l=E8ne Rey, 2001. "The Determinants of Cross-Border Equity Flows: The Geography of=20 Information," International Finance 0012002, EconWPA.

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