Investor experiences and international capital flows
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- dc.contributor.author Malmendier, Ulrike
- dc.contributor.author Pouzo, Demian
- dc.contributor.author Vanasco, Victoria
- dc.date.accessioned 2020-07-24T08:46:03Z
- dc.date.available 2020-07-24T08:46:03Z
- dc.date.issued 2020
- dc.description.abstract We propose a novel explanation for classic international macro puzzles regarding capital flows and portfolio investment, which builds on modern macro-finance models of experience-based belief formation. Individual experiences of past macroeconomic outcomes have been shown to exert a long-lasting influence on beliefs about future realizations, and to explain domestic stock-market investment. We argue that experience effects can explain the tendency of investors to hold an over proportional fraction of their equity wealth in domestic stocks (home bias), to invest in domestic equity markets in periods of domestic crises (retrenchment), and to withdraw capital from foreign equity markets in periods of foreign crises (fickleness). Experience-based learning generates additional implications regarding the strength of these puzzles in times of higher or lower economic activity and depending on the demographic composition of market participants. We test and confirm these predictions in the data.
- dc.description.sponsorship Victoria Vanasco acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563).
- dc.format.mimetype application/pdf
- dc.identifier.citation Malmendier U, Pouzo D, Vanasco V. Investor experiences and international capital flows. Journal of International Economics. 2020 May;124:1-19. DOI: 10.1016/j.jinteco.2020.103302
- dc.identifier.doi http://dx.doi.org/10.1016/j.jinteco.2020.103302
- dc.identifier.issn 0976-0792
- dc.identifier.uri http://hdl.handle.net/10230/45188
- dc.language.iso eng
- dc.publisher Elsevier
- dc.relation.ispartof Journal of International Economics. 2020 May;124:1-19. DOI: 10.1016/j.jinteco.2020.103302
- dc.rights © 2020 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/4.0/
- dc.subject.keyword Experience effects
- dc.subject.keyword Learning
- dc.subject.keyword Asset prices
- dc.subject.keyword Portfolio choice
- dc.subject.keyword Demographics
- dc.title Investor experiences and international capital flows
- dc.type info:eu-repo/semantics/article
- dc.type.version info:eu-repo/semantics/publishedVersion