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.
Golub, Stephen S., "International Diversification of Social and Private Risk: The US and Japan" (1990). Cowles Foundation Discussion Papers. 1198.