A dynamic model of consumption and portfolio decisions is analyzed in which agents seek robust choices against some misspecification of the model probability distribution. This near-rational environment can at the same time explain an imperfect international portfolio diversification and break...

The majority of general equilibrium models of international portfolio holdings differ substantially in their modeling procedures but typically feature a term that captures the relationship between real exchange rate changes and relative, i.e. home vs. foreign, equity market returns. However,...