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U.S. international equity investment and past prospective returns

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Counter to extant stylized facts, using newly available data on country allocations in U.S. investors' foreign equity portfolios we find that (i) U.S. investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and (ii) U.S. 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, U.S. investors' foreign equity portfolios outperformed a value-weighted foreign benchmark by 160 basis points per year.

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  • Stephanie E. Curcuru & Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2011. "U.S. international equity investment and past prospective returns," International Finance Discussion Papers 1016, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1016
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    2. Fuertes, Ana-Maria & Phylaktis, Kate & Yan, Cheng, 2019. "Uncovered equity “disparity” in emerging markets," Journal of International Money and Finance, Elsevier, vol. 98(C), pages 1-1.
    3. Jannic Cutura & Gianpaolo Parise & Andreas Schrimpf, 2025. "Debt Derisking," Management Science, INFORMS, vol. 71(1), pages 615-634, January.
    4. Dongwon Lee & Kyungkeun Kim, 2016. "Global Risk and International Equity Portfolio Rebalancing," Working Papers 201605, University of California at Riverside, Department of Economics.
    5. Cai, Fang & Warnock, Francis E., 2012. "Foreign exposure through domestic equities," Finance Research Letters, Elsevier, vol. 9(1), pages 8-20.
    6. Isaac L. Ochieng’ & Tobias O. Olweny & Oluoch J. Oluoch & Gordon O. Ochere, 2019. "Effect of foreign equity flows on stock market volatility in Kenya Empirical evidence at Nairobi securities exchange," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 8(3), pages 1-5.
    7. Carol C. Bertaut & Ruth A. Judson, 2014. "Estimating U.S. Cross-Border Securities Positions: New Data and New Methods," International Finance Discussion Papers 1113, Board of Governors of the Federal Reserve System (U.S.).
    8. Numan Ülkü & Petar Petrov, 2015. "How Reliable Are the Findings of ‘Foreign’ Investor Studies That Use TIC Data? A Look from the Host Market," International Review of Finance, International Review of Finance Ltd., vol. 15(4), pages 521-553, December.
    9. Gao Meng & Eric Wincoop, 2020. "A Decomposition of International Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(2), pages 362-389, June.
    10. Koepke, Robin, 2015. "What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature," MPRA Paper 62770, University Library of Munich, Germany.

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