TY  - JOUR
AU  - Collard,Fabrice
AU  - Dellas,Harris
AU  - Diba,Behzad
AU  - Stockman,Alan
TI  - Goods Trade and International Equity Portfolios
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13612
PY  - 2007
Y2  - November 2007
UR  - http://www.nber.org/papers/w13612
L1  - http://www.nber.org/papers/w13612.pdf
N1  - Author contact info:
Fabrice Collard
University of Toulouse
Manufacture des Tabacs
21 Allee de Brienne
31000 Toulouse, France
E-Mail: fabrice.collard@univ-tlse1.fr

Harris Dellas
Department of Economics
University of Bern
VWI, Schanzeneckstrasse 1
CH 3012 Bern
Switzerland
E-Mail: harris.dellas@vwi.unibe.ch

Behzad Diba
Department of Economics
Georgetown University
Washington, DC  20057
Tel: 202-687-5682
Fax: 202-687-6102
E-Mail: dibab@georgetown.edu

Alan C. Stockman
Department of Economics
University of Rochester
Rochester, NY  14627-0156
Tel: 585/275-7214
Fax: 585/256-2309
E-Mail: N/A user is deceased
AB  - We show that international trade in goods is the main determinant of international equity portfolios and offers a compelling -- theoretically and empirically -- resolution of the portfolio home bias puzzle. The model implies that investors can achieve full international risk diversification if the share of wealth invested in foreign equity matches their country's degree of openness (the imports to GDP share). The empirical evidence strongly supports this implication.
ER  -