Economics, Econometrics and Finance
8 years ago

Stocks vs. consumption: Why international risk sharing gains differ so much!

Journal of International Economics
Why do stocks and consumption imply such different gains from international risk sharing?
Karen K. Lewis

Paper Summary

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Stock returns and consumption-based models show different gains from international risk-sharing. The reason for this is the higher variability of stock returns and its impact on utility. The differences in gains do not come from treating stock returns as exogenous.