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dc.contributor.authorBROER, Tobias
dc.date.accessioned2008-09-02T07:51:06Z
dc.date.available2008-09-02T07:51:06Z
dc.date.issued2008
dc.identifier.issn1725-6704
dc.identifier.urihttps://hdl.handle.net/1814/9232
dc.description.abstractWealthier people generally hold a larger part of their savings in risky assets. Using the US Survey of Consumer Finances, I show that wealthier households also have a higher portfolio share of foreign assets. This relative home bias of the poor does not seem to be explained by xed participation costs alone, as the portfolio share of foreign assets increases with nan- cial wealth even among participants in foreign asset markets. This paper shows how both biases of poorer agents' portfolios, towards safe and home assets, can arise in a simple 2 country economy with income and port- folio heterogeneity. Poor investors are naturally biased against domestic equity when wages and capital returns are positively correlated, making equity a bad hedge against uctuations in labour income relative to bonds. Moreover poor investors prefer home to foreign bonds if equilibrium terms of trade movements systematically lead to a fall in the purchasing power of domestic assets in periods of high wages. I show that this is likely to be the case if aggregate supply shocks at home are more important than abroad. Finally, the model shows that aggregate home bias in the country portfolio implies relative home bias of the poor and vice versa.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2008/28en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectF36en
dc.subjectG11en
dc.subjectE21en
dc.subjectD11en
dc.subjectD31en
dc.subjectHeterogeneous Agentsen
dc.subjectHome Biasen
dc.subjectInequalityen
dc.subjectInternational Asset Diversificationen
dc.subjectPortfolio Choiceen
dc.titleThe Home Bias of the Poor: Terms of Trade Effects and and Portfolios across the Wealth Distributionen
dc.typeWorking Paperen
dc.neeo.contributorBROER|Tobias|aut|
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