Title

International Diversification of Social and Private Risk: The US and Japan

Document Type

Discussion Paper

Publication Date

8-1-1990

CFDP Number

955

CFDP Pages

33

Abstract

This paper concerns the gains from international trade in risky assets, with an application to the United States and Japan. I examine the role of international financial markets in diversifying the risks associated with the aggregate consumption opportunities of a nation (social risk) and the risks related to individual agents’ consumption opportunities (private risk). The main empirical result is that international portfolio diversification between the United States and Japan leads to small reductions in social risk but large reductions in some private risks, especially for corporate profits.

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