Financial Markets and International Risk Sharing



Financial Markets and International Risk Sharing*

Martin Schmitz^

Department of Economics and IIIS,
Trinity College Dublin

November 2007

Abstract

Panel analysis of 20 industrial countries shows evidence for pro-cyclicality of
capital gains on domestic stock markets - in particular over a medium term horizon.
Thus, with cross-border ownership of portfolio equity investments, potential for
international smoothing of domestic output fluctuations by means of the capital
gains channel is found. Individual country analysis reveals substantial heterogeneity
of cyclicality patterns. Evidence suggests that this cross-country variation can be
explained by the level of economic development and the size of financial markets.

Keywords: International risk sharing, capital gains, cross-border investment
JEL Classification: F21, F30, G15

*The author is grateful to Philip Lane for his encouragement and very helpful comments.

^Trinity College Dublin, Department of Economics and Institute for International Integration Studies,
College Green, Dublin 2, Ireland. E-mail:
[email protected].



More intriguing information

1. Reconsidering the value of pupil attitudes to studying post-16: a caution for Paul Croll
2. The name is absent
3. Education Responses to Climate Change and Quality: Two Parts of the Same Agenda?
4. Detecting Multiple Breaks in Financial Market Volatility Dynamics
5. The name is absent
6. The name is absent
7. THE RISE OF RURAL-TO-RURAL LABOR MARKETS IN CHINA
8. A Consistent Nonparametric Test for Causality in Quantile
9. Accurate, fast and stable denoising source separation algorithms
10. The name is absent