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-averse investors choose not to react to return differentials in such an extreme way as in a world with perfect foresight. Uncertainty … optimizing country allocation. However, covariances and betas tend to be intertemporally unstable. When world markets become …
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This study uncovers a cross-border financial diversification motive related to goods and services trade. Using the IMF CPIS panel data set for a broad set of country pairs and for the period 2001-2012, I find empirical evidence that the share of equity in a bilateral portfolio decreases with...
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