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U.S. international equity investment and past prospective returns

Author Info

Listed author(s):
  • Stephanie E. Curcuru
  • Charles P. Thomas
  • Francis E. Warnock
  • Jon Wongswan

Abstract

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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File URL: http://www.federalreserve.gov/pubs/ifdp/2011/1016/default.htm
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File URL: http://www.federalreserve.gov/pubs/ifdp/2011/1016/ifdp1016.pdf
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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1016.

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Date of creation: 2011
Handle: RePEc:fip:fedgif:1016
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Keywords: Investments; Foreign ; Portfolio management;

This paper has been announced in the following NEP Reports:

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Cited by:

  1. Cai, Fang & Warnock, Francis E., 2012. "Foreign exposure through domestic equities," Finance Research Letters, Elsevier, vol. 9(1), pages 8-20.
  2. Dongwon Lee & Kyungkeun Kim, 2016. "Global Risk and International Equity Portfolio Rebalancing," Working Papers 201605, University of California at Riverside, Department of Economics.
  3. 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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