Two Essays on International Asset Pricing Model
Date Issued
2005
Date
2005
Author(s)
Yu, Hsiao-Yuan
DOI
en-US
Abstract
We investigate the home bias puzzle via a representative country and a two heterogeneous countries international asset pricing models respectively. Under the representative country economy with the discrete time setup, the home bias puzzle is mainly affected by capital flow. While running surplus in capital flow, a representative home agent is more apt to hold home asset rather than foreign asset and vice versa. Under the two heterogeneous countries economy with the continuous time setup, the home bias puzzle is primarily influenced by the investor’s risk tolerance and the relative rate of return. The optimal international portfolio weight is independent of nontradable consumptions and price levels in our model. In addition, the equilibrium exchange rate is eventually solved after the market clearing condition is employed. It is independent of nontradable consumptions and price levels as well. Our result is consistent with the conventional international asset pricing theory that higher home asset returns will make home currency appreciate but higher exchange rate volatility will have it depreciate.
Subjects
資本流動
資產定價
均衡匯率
非交易消費
Equlibrium Exchange Rate
Capital Flow
Asset Pricing
Home Bias
Nontradable Consumption
Type
thesis
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