Financial integration, international portfolio choice and the European Monetary Union

Arbeitspapier

We investigate the determinants of bilateral international equity and bond portfolio reallocation across a large cross section of countries over the 1997 to 2001 period. We first argue that financial integration is not a global phenomenon, as equity and bond home biases declined significantly only among European countries, Australia, New Zealand and Singapore. Then, we show that the European Economic and Monetary Union (EMU) eased the access to the equity market and, to a larger extent, the bond market; thereby, enhancing regional financial integration in the euro area. Beside the effect of the EMU, the strongest determinants of the changes in portfolio weights are expected diversification benefits and the initial degree of underweight.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 626

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; International Finance Forecasting and Simulation: Models and Applications ; Portfolio Choice; Investment Decisions
• Subject: EMU ; home bias ; International portfolio weights ; Risk diversification ; Internationaler Finanzmarkt ; Portfolio-Management ; Eurozone ; EU-Staaten ; Welt ; Entscheidung unter Risiko ; Portfoliodiversifikation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Santis, Roberto A. ; Gérard, Bruno
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/153060
• Last update: 10.03.2025, 11:46 AM CET