Tài liệu ASSESSING THE BENEFITS OF INTERNATIONAL PORTFOLIO DIVERSIFICATION IN BONDS AND STOCKS ppt

WORKING PAPER SERIES
NO 883 / MARCH 2008
ASSESSING THE BENEFITS
OF INTERNATIONAL
PORTFOLIO
DIVERSIFIC ATION IN
BONDS AND STOCKS
by Rober to A. De Santis
and Lucio Sarno
Format: (210.00
x 297.00 mm);
Date: Mar 13,
2008 16:49:21;
Output Profile:
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v2 (ECI); Preflight:
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WORKING PAPER SERIES
NO 883 / MARCH 2008
In 2008 all ECB
publications
feature a motif
taken from the
10 banknote.
ASSESSING THE BENEFITS
OF INTERNATIONAL PORTFOLIO
DIVERSIFICATION IN BONDS
AND STOCKS
1
by Roberto A. De Santis
2

and Lucio Sarno
3
This paper can be downloaded without charge from
or from the Social Science Research Network
electronic library at />1 This paper was partly written while Lucio Sarno was a Visiting Scholar at the International Monetary Fund. We are grateful for constructive
comments at various stages of this paper to Lorenzo Cappiello, John Cochrane and Robert Engle. The authors alone are responsible for
the views expressed in the paper and for any errors that may remain.
2 Corresponding author: European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany; Tel: +49 69 1344 0;
e-mail:
3 University of Warwick and Centre for Economic Policy Research (CEPR). Contact address: Finance Group,
Warwick Business School, University of Warwick, Coventry CV4 7AL,
United Kingdom; e-mail:
© European Central Bank, 2008
Address
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Any reproduction, publication and
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written authorisation of the ECB or the
author(s).
The views expressed in this paper do not
necessarily refl ect those of the European
Central Bank.
The statement of purpose for the ECB
Working Paper Series is available
from the ECB website, .
europa.eu/pub/scientifi c/wps/date/html/
index.en.html
ISSN 1561-0810 (print)
ISSN 1725-2806 (online)
3
ECB
Working Paper Series No 883
March 2008
Abstract
4
Non-technical summary
5
1 Introduction
7
2 A factor pricing model of
exchange rates, bonds and stocks
10
2.1 Setup
10
2.2 Uncovered interest rate parity
11

2.3 Uncovered return parity for
equities and bonds
11
2.4 Equity and bond returns equilibrium
12
2.5 The full parity system
12
3 Empirical implementation
13
3.1 GMM estimation and
restrictions to test comovement
13
3.2 Stochastic discount factor
14
3.3 Risk premia
15
4 Data
15
5 Empirical results
17
5.1 The base case
17
5.2 The US discount factor
18
5.3 The model with time-varying risk premia
19
5.4 Performance of global
and domestic portfolios
20
5.5 Time-varying comovement from the 1980s

22
6 Concluding remarks
23
References
25
Tables and fi gures
29
European Central Bank Working Paper Series
41
CONTENTS
4
ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
March 2008
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Working Paper Series No 883
March 2008
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11
ECB
Working Paper Series No 883
March 2008
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12
ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
March 2008
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14
ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
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16
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Working Paper Series No 883
March 2008
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17
ECB
Working Paper Series No 883
March 2008
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18
ECB
Working Paper Series No 883
March 2008
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Working Paper Series No 883
March 2008
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22
ECB
Working Paper Series No 883
March 2008
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23
ECB
Working Paper Series No 883
March 2008
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24
ECB
Working Paper Series No 883
March 2008
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