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American Economic Review: Vol. 101 No. 7 (December 2011)

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US International Equity Investment and Past and Prospective Returns

Article Citation

Curcuru, Stephanie E., Charles P. Thomas, Francis E. Warnock, and Jon Wongswan. 2011. "US International Equity Investment and Past and Prospective Returns." American Economic Review, 101(7): 3440-55.

DOI: 10.1257/aer.101.7.3440

Abstract

Counter to extant stylized facts, using newly available data on country allocations in US investors' foreign equity portfolios we find that (i) US investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and (ii) US 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, US investors' foreign equity portfolios outperformed a value-weighted foreign benchmark by 160 basis points per year. (JEL: C58, G11, G15)

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Authors

Curcuru, Stephanie E. (Federal Reserve Board)
Thomas, Charles P. (Federal Reserve Board)
Warnock, Francis E. (U VA)
Wongswan, Jon (Phatra Securities Public Company Limited, Bangkok)

JEL Classifications

C58: Financial Econometrics
G11: Portfolio Choice; Investment Decisions
G15: International Financial Markets


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