would optimally diversify away domestic output risk. Therefore, in a world without investor home bias, consumption growth … country appears to be highly correlated with its own output growth relative to the world. This phenomenon may be called …

equilibrium. We construct an estimate of the world portfolio of shares available to investors who are not controlling shareholders …. This available world portfolio differs sharply from the world market portfolio. In regressions explaining the portfolio … weights of U.S. investors, the world portfolio of available shares has a positive significant coefficient but the world market …