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

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  • Stephen S. Golub

    (Swarthmore College)

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.

Suggested Citation

  • Stephen S. Golub, 1990. "International Diversification of Social and Private Risk: The US and Japan," Cowles Foundation Discussion Papers 955, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:955
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    2. Philip Lane, 2001. "Do international investment income flows smooth income?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(4), pages 714-736, December.
    3. Jääskelä, Jarkko, 1997. "Incomplete insurance market and its policy implication within European Monetary Union," Research Discussion Papers 8/1997, Bank of Finland.
    4. Tesar, Linda L., 1995. "Evaluating the gains from international risksharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 95-143, June.
    5. Jääskelä, Jarkko, 1997. "Incomplete insurance market and its policy implication within European Monetary Union," Bank of Finland Research Discussion Papers 8/1997, Bank of Finland.

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