Trade Policy and Risk Diversification
The paper analyses the influence of trade policy on the investment decisions of a rep- resentative individual. In particular, the increased uncertainty of future income is con- sidered in the investment behaviour of individuals. The optimal portfolio-decision of a representative working individual is analysed in comparison to a non-working shareholder. The paper finds an important influence from trade policy on the saving and investment behaviour of a working individual. Yet the optimal demand for an asset does not always increase if a protectionist trade policy is introduced in the corresponding sector as might be expected. The asset covariance and the labor risk correlation, especially the working location of the individual, determine the final results of the investment decision and can even reverse the expected effect from protection. Moreover, an effective hedge for the income risk is not possible in most of the observed scenarios.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: Hölderlinstr. 3, D - 57068 Siegen|
Phone: ++49 (0)271 740-3139
Fax: ++49 (0)271 740-2590
Web page: http://www.uni-siegen.de/fb5/vwl/research/diskussionsbeitraege/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Urban J. Jermann, 1997.
"International portfolio diversification and labor/leisure choice,"
Discussion Paper / Institute for Empirical Macroeconomics
119, Federal Reserve Bank of Minneapolis.
- Urban J. Jermann, 1998. "International Portfolio Diversification and Labor/Leisure Choice," NBER Working Papers 6382, National Bureau of Economic Research, Inc.
- Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992.
"Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model,"
NBER Working Papers
3954, National Bureau of Economic Research, Inc.
- Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992. "Labor supply flexibility and portfolio choice in a life cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 427-449.
- John Heaton & Deborah Lucas, 2000. "Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk," Journal of Finance, American Finance Association, vol. 55(3), pages 1163-1198, 06.
- Massimo Massa & Andrei Simonov, 2006.
"Hedging, Familiarity and Portfolio Choice,"
Review of Financial Studies,
Society for Financial Studies, vol. 19(2), pages 633-685.
- Dreze, Jacques H. & Modigliani, Franco, 1972.
"Consumption decisions under uncertainty,"
Journal of Economic Theory,
Elsevier, vol. 5(3), pages 308-335, December.
- Krebs, tom & Krishna, Pravin & Maloney, William, 2005.
"Trade policy, income risk, and welfare,"
Policy Research Working Paper Series
3622, The World Bank.
- Tom Krebs & Pravin Krishna, 2005. "Trade Policy, Income Risk and Welfare," 2005 Meeting Papers 271, Society for Economic Dynamics.
- Tom Krebs & Pravin Krishna & William Maloney, 2005. "Trade Policy, Income Risk, and Welfare," NBER Working Papers 11255, National Bureau of Economic Research, Inc.
- Tom Krebs & Pravin Krishna & William Maloney, 2004. "Trade Policy, Income Risk, and Welfare," Working Papers 2004-09, Brown University, Department of Economics.
- Christian Julliard, 2004. "Human capital and international portfolio choice," LSE Research Online Documents on Economics 4813, London School of Economics and Political Science, LSE Library.
- Alok Kumar & William N. Goetzmann, 2001.
"Equity Portfolio Diversification,"
Yale School of Management Working Papers
ysm236, Yale School of Management.
- Harold L. Cole & Maurice Obstfeld, 1989.
"Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?,"
NBER Working Papers
3027, National Bureau of Economic Research, Inc.
- Cole, Harold L. & Obstfeld, Maurice, 1991. "Commodity trade and international risk sharing : How much do financial markets matter?," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 3-24, August.
- Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April.
- Aizenman, Joshua, 2008.
"On the hidden links between financial and trade opening,"
Journal of International Money and Finance,
Elsevier, vol. 27(3), pages 372-386, April.
- Joshua Aizenman, 2003. "On the Hidden Links Between Financial and Trade Opening," NBER Working Papers 9906, National Bureau of Economic Research, Inc.
- Svaleryd, Helena & Vlachos, Jonas, 1999.
"Markets for Risk and Openness to Trade: How are they Related?,"
SSE/EFI Working Paper Series in Economics and Finance
327, Stockholm School of Economics, revised 10 Sep 2000.
- Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
- Bertaut, Carol C. & Haliassos, Michael, 1997.
"Precautionary portfolio behavior from a life-cycle perspective,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 21(8-9), pages 1511-1542, June.
- Carol C. Bertaut & Michael Haliassos, 1996. "Precautionary Portfolio Behavior from a Life-Cycle Perspective," Finance 9604001, EconWPA.
- Carol C. Bertaut & Michael Haliassos, 1996. "Precautionary portfolio behavior from a life-cycle perspective," International Finance Discussion Papers 542, Board of Governors of the Federal Reserve System (U.S.).
- Jonathan Eaton & Gene M. Grossman, 1985.
"Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 18(2), pages 258-72, May.
- Jonathan Eaton & Gene M. Grossman, 1981. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," NBER Working Papers 0797, National Bureau of Economic Research, Inc.
- Heaton, John & Lucas, Deborah, 2000. "Portfolio Choice in the Presence of Background Risk," Economic Journal, Royal Economic Society, vol. 110(460), pages 1-26, January.
- Brooks, Robin & Del Negro, Marco, 2004.
"The rise in comovement across national stock markets: market integration or IT bubble?,"
Journal of Empirical Finance,
Elsevier, vol. 11(5), pages 659-680, December.
- Robin Brooks & Marco Del Negro, 2002. "The rise in comovement across national stock markets: market integration or IT bubble?," FRB Atlanta Working Paper 2002-17, Federal Reserve Bank of Atlanta.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
- Marco Del Negro & Robin Brooks, 2005. "A Latent Factor Model with Global, Country, and Industry Shocks for International Stock Returns," IMF Working Papers 05/52, International Monetary Fund.
- Gollier Christian & Schlee Edward E, 2006.
"Increased Risk-Bearing with Background Risk,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 6(1), pages 1-29, March.
- Natalia T. Tamirisa, 1999.
"Exchange and Capital Controls as Barriers to Trade,"
IMF Staff Papers,
Palgrave Macmillan, vol. 46(1), pages 4.
- Natalia T. Tamirisa, 1998. "Exchange and Capital Controls as Barriers to Trade," IMF Working Papers 98/81, International Monetary Fund.
- Cassing, James H., 1996. "Protectionist mutual funds," European Journal of Political Economy, Elsevier, vol. 12(1), pages 1-18, April.
- Harms, Philipp & Hefeker, Carsten, 2003. "Globalization and unemployment: the role of international diversification," Economics Letters, Elsevier, vol. 78(2), pages 281-286, February.
When requesting a correction, please mention this item's handle: RePEc:sie:siegen:126-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Gail)
If references are entirely missing, you can add them using this form.