and countercyclical. We show that a two-country RBC model with productive investment and unrestricted international trade … in stocks and bonds can explain these facts. Capital accumulation and shocks to the efficiency of investment are key …

-country risk sharing. This paper develops a model that simultaneously generates realistic portfolio holdings and return … volatilities, and imperfect risk pooling. In the structure here, there are supply shocks, aggregate demand shocks (variations in … government purchases, taste shocks), and exogenous shocks to equity risk premia. There is trade in domestic and foreign stocks …

empirically domestic equities don’t appear to be a good hedge against either risk factors; Second, equity portfolios are highly …-financial income risk, conditionally on bond returns. The model delivers equilibrium portfolios that are well-behaved as a function of …

non-tradable income risk), (ii) asset trade costs in international financial markets (such as transaction costs or … investment. …

foreign real bonds. Bonds matter: in equilibrium, investors structure their bond portfolio to hedge real exchange rate risk … against other sources of risk, conditionally on bond returns. We estimate the optimal equity and bond portfolios implied by …

foreign real bonds. Bonds matter: in equilibrium, investors structure their bond portfolio to hedge real exchange rate risk … against other sources of risk, conditionally on bond returns. We estimate the optimal equity and bond portfolios implied by …