Home bias is a perennial feature of international capital markets. We review various
explanations of this puzzling phenomenon highlighting recent developments in …

This paper surveys the literature on the linkages between asset prices and macroeconomic
outcomes. It focuses on three major questions. First, what are the basic theoretical linkages …

Abstract The Great Financial Crisis of 2007-09 confirmed the vital importance of advancing
our understanding of macrofinancial linkages, the two-way interactions between the real …

We present a signalling theory of Quantitative Easing (QE) at the zero lower bound on the
short term nominal interest rate. QE is effective because it generates a credible signal of low …

This paper presents a model of international portfolios with real exchange rate and non-
financial risks that account for observed levels of equity home bias. Bonds matter: in …

With the beginning of the Euro Crisis, the long-standing trend of European financial
integration reversed. Investors unwound cross-border positions of debt obligations and …

We compare the performance of the perturbation-based (local) portfolio solution method of
Devereux & Sutherland (2010a, 2011) with a global solution method. As a test suite we use …

This chapter is structured in three parts. The first part outlines the methodological steps,
involving both theoretical and empirical work, for assessing whether an observed allocation …

This book provides a comprehensive and critical analysis of research outcomes on the
equity home bias puzzle–that people overinvest in domestic stocks relative to the …

The ability to issue debt that pays in units of the domestic good leads a country to
accumulate a large and negative net foreign asset position while maintaining a positive …