SSE/EFI Working Paper Series in Economics and Finance
International Portfolio Diversification and the Foreign Exchange Risk Premium
Abstract: A multi-country model of intertemporal portfolio choice
and the foreign exchange risk premium which incorporates both nominal price
and relative price risk is developed. Portfolio demands are derived and
interpreted in terms of diversification and hedge portfolios. The
equilibrium foreign exchange risk premium is then analyzed and discussed in
terms of e.g. relative and nominal price uncertainty. Special attention is
paid to the effects of deviations from purchasing power parity.
Keywords: Risk premium model; international portfolio diversification; (follow links to similar papers)
JEL-Codes: E44; E41; G15; (follow links to similar papers)
43 pages, December 1994
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom