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International Portfolios: A Comparison of Solution Methods

Rabitsch, Katrin and Stepanchuk, Serhiy and Tsyrennikov, Viktor (2015) International Portfolios: A Comparison of Solution Methods. Journal of International Economics , 97 (2). pp. 404-422. ISSN 0022-1996

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We compare the performance of the perturbation-based (local) portfolio solution method of Devereux and Sutherland (2010a, 2011) with a global solution method. As a test suite we use model specifications that broadly capture features of international financial trade, between advanced economies, and between advanced and emerging economies. We consider both symmetric country setups and asymmetric setups, that capture important empirical facts such as differences in macroeconomic volatility, differences in portfolio composition, and high equity premia. We find that the local method performs well at business cycle frequencies, both in the symmetric and asymmetric settings, while significant differences arise at long horizons in asymmetric settings. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. The original publication is available at www.elsevier.com.
Keywords: Country Portfolios / Solution Methods / Portfolio Allocation
Classification Codes: JEL E44, F41, G11, G15
Version of the Document: Accepted for Publication
Depositing User: ePub Administrator
Date Deposited: 02 Nov 2016 12:41
Last Modified: 05 Sep 2017 14:41
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/72682/
URI: http://epub.wu.ac.at/id/eprint/5220


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