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  5. US International Equity Investment and Past and Prospective Returns

US International Equity Investment and Past and Prospective Returns

  • Stephanie E. Curcuru
  • Charles P. Thomas
  • Francis E. Warnock
  • Jon Wongswan
American Economic Review
vol. 101, no. 7, December 2011
(pp. 3440-55)
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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)

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

Additional Materials

JEL Classification

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