US International Equity Investment and Past and Prospective Returns
Stephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock, Jon Wongswan
American Economic Review · 2011 · Volume 101 · Issue 7
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)
Keywords
Financial Econometrics, Portfolio Choice, Investment Decisions, International Financial Markets
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