The International Diversification Puzzle when Goods Prices Are Sticky : It's Really About Exchange-Rate Hedging, not Equity Portfolios »
Series: IMF Working Papers
Author(s): Akito Matsumoto , and Charles Engel
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 January 2009
Keywords: international risk sharing, international portfolio allocation, exchange rate hedging, equity home bias, exchange rate, hedge, home currency, nominal exchange rate, Equity Home Bias International Risk Sharing,
This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some nominal goods prices are sticky. Trade in...