This paper develops a theory of the international trade pattern in risky assets by applying the law of comparative advantage to asset trade. According to this law there is a tendency for a country to import assets that have relatively high autarky prices. The autarky price of an asset is high if...

The objective of this paper is to show that the proposal by Froot and Thaler (1990) of delayed portfolio adjustment can account for a broad set of puzzles about the relationship between interest rates and exchange rates. The puzzles include: i) the delayed overshooting puzzle; ii) the forward...