International capital markets with time-varying preferences

Arbeitspapier

We propose a 2-country asset-pricing model where agents' preferences change endogenously as a function of the popularity of internationally traded goods. We determine the effect of the time-variation of preferences on equity markets, consumption and portfolio choices. When agents are more sensitive to the popularity of domestic consumption goods, the local stock market reacts more strongly to the preferences of local agents than to the preferences of foreign agents. Therefore, home bias arises because home-country stock represents a better investment opportunity for hedging against future fluctuations in preferences. We test our model and find that preference evolution is a plausible driver of key macroeconomic variables and stock returns.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SAFE Working Paper ; No. 176

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Exchange and Production Economies ; Incomplete Markets ; General Equilibrium and Disequilibrium: Financial Markets ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Macroeconomics: Consumption; Saving; Wealth ; International Investment; Long-term Capital Movements ; Portfolio Choice; Investment Decisions ; Asset Pricing; Trading Volume; Bond Interest Rates
• Thema: asset pricing ; general equilibrium ; heterogeneous agents ; interdependent preferences ; portfolio choice

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Curatola, Giuliano ; Dergunov, Ilya
• Ereignis: Veröffentlichung
• (wer): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (wo): Frankfurt a. M.
• (wann): 2017

Weitere Informationen

• DOI: doi:10.2139/ssrn.3013062
• Handle: http://hdl.handle.net/10419/167573
• URN: urn:nbn:de:hebis:30:3-437482