IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Trade Policy and Risk Diversification

  • Barbara Pfeffer
Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/126-06.pdf
    Download Restriction: no

    Paper provided by Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht in its series Volkswirtschaftliche Diskussionsbeiträge with number 126-06.

    as
    in new window

    Length: 26 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:sie:siegen:126-06
    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/Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. William N. Goetzmann & Alok Kumar, 2008. "Equity Portfolio Diversification," Review of Finance, European Finance Association, vol. 12(3), pages 433-463.
    2. Urban J. Jermann, 1997. "International portfolio diversification and labor/leisure choice," Discussion Paper / Institute for Empirical Macroeconomics 119, Federal Reserve Bank of Minneapolis.
    3. Natalia T. Tamirisa, 1999. "Exchange and Capital Controls as Barriers to Trade," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 4.
    4. Tom Krebs & Pravin Krishna & William Maloney, 2005. "Trade Policy, Income Risk, and Welfare," NBER Working Papers 11255, National Bureau of Economic Research, Inc.
    5. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
    6. 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.
    7. Massimo Massa & Andrei Simonov, 2006. "Hedging, Familiarity and Portfolio Choice," Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 633-685.
    8. DREZE, Jacques H. & MODIGLIANI, Franco, . "Cosumption decisions under uncertainty," CORE Discussion Papers RP -119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. 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.
    14. 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.
    15. Joshua Aizenman, 2003. "On the Hidden Links Between Financial and Trade Opening," NBER Working Papers 9906, National Bureau of Economic Research, Inc.
    16. Robin Brooks & Marco Del Negro, 2002. "The rise in comovement across national stock markets: market integration or IT bubble?," Working Paper 2002-17, Federal Reserve Bank of Atlanta.
    17. 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.
    18. 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.
    19. 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.
    20. Harms, Philipp & Hefeker, Carsten, 2003. "Globalization and unemployment: the role of international diversification," Economics Letters, Elsevier, vol. 78(2), pages 281-286, February.
    21. Cassing, James H., 1996. "Protectionist mutual funds," European Journal of Political Economy, Elsevier, vol. 12(1), pages 1-18, April.
    22. 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.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.