Integrated capital markets facilitate risk sharing across countries. Lower home bias in financial investments is an indicator of risk sharing. We highlight that existing indicators of equity home bias in the literature suffer from incomplete coverage because they consider only listed equities....

With a unique data set summarizing the quality of rules-based fiscal governance in EU member states, we show that stronger fiscal rules in euro area members reduce sovereign risk premia, in particular in times of market stress. To do so, we develop a model of sovereign spreads that are...