International Financial Integration*



-44 -

Table 6. Foreign Asset Returns and Domestic Market Returns

(1)

Real return

For. assets

(2)

Real return

For. assets

(3)

Real return

Port.Eq. asset

(4)

Real return

s Port.Eq. asset

(5)

Real return
s Debt assets

(6)

Real yield

Debt assets

Dom Stock Return

Dom Bond Return

Dom Interest Rate

0.12

(5.98)***

0.45

(8.90)***

0.37

(8.37)***

0.42

(3.94)***

0.47

(13.2)***

0.47

(10.2)***

Adj R2

0.15

0.52

0.36

0.11

0.55

0.42

Number of observ.

220

205

137

125

144

158

* Panel regressions with country fixed effects (t-statistics in parenthesis). ** (***) indicates statistical
significance at the 0.05 (0.01) confidence level. See text for definition of variables.

Table 7 Rates of Return and Real Exchange Rates

Correlations

(1)

Assets

P ( r, rUS )

(2)

Assets

ρ ( rt, drert )

(3)

Assets

ρ( rUS, dret∙t)

(4)

Liabilities

P( r, rU )

(5)

Liabilities
ρ( rt, drert )

(6)

Liabilities

ρ( rU, drert )

Australia

0.16

-0.47

0.79

-0.21

-0.54

0.94

Austria

-0.02

-0.32

0.95

0.19

-0.20

0.92

Finland

-0.10

-0.61

0.84

0.73

-0.36

0.37

France

0.36

-0.59

0.54

0.60

-0.48

0.40

Germany

-0.59

-0.74

0.98

-0.05

-0.29

0.97

Italy

-0.01

-0.52

0.84

-0.34

-0.62

0.95

Japan

-0.80

-0.96

0.93

0.66

0.24

0.88

Netherlands

-0.45

-0.80

0.89

-0.36

-0.72

0.91

Portugal

-0.04

-0.46

0.91

-0.34

-0.22

0.84

Spain

-0.55

-0.78

0.94

-0.70

-0.79

0.96

Sweden

0.17

-0.54

0.74

-0.22

-0.72

0.83

Switzerland

-0.51

-0.78

0.93

-0.17

-0.63

0.87

United Kingd.

-0.45

-0.93

0.72

-0.48

-0.88

0.82

Mean

-0.22

-0.65

0.85________

-0.05

-0.48

0.82__________

Note: rt, rtUS are real returns on foreign holdings in domestic currency and in US dollars, respectively;
drer is the percentage change in bilateral end-of-period real exchange rate vis-à-vis the US.
Correlations calculated over time period 1982-2001 or shorter.



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