International Portfolio Choice in an Overlapping Generations Model with Transaction Costs

  • Benôıt Carmichæl Alain Coën
  • Published 2001

Abstract

This paper studies the implications for international portfolio diversification of a simple OLG model of the world economy with transaction costs. Our main result shows that the introduction of very small transaction costs is sufficient to reproduce the large home bias observed in the composition of portfolios. 

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