IMF Working Papers

New Evidence on the US Excess Return on Foreign Portfolios

By Carol C. Bertaut, Stephanie E. Curcuru, Ester Faia, Pierre-Olivier Gourinchas

November 22, 2024

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Format: Chicago

Carol C. Bertaut, Stephanie E. Curcuru, Ester Faia, and Pierre-Olivier Gourinchas. "New Evidence on the US Excess Return on Foreign Portfolios", IMF Working Papers 2024, 241 (2024), accessed January 23, 2025, https://doi.org/10.5089/9798400294921.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We provide new estimates of the return on US external claims and liabilities using confidential, high-quality, security-level data. The excess return is positive on average, since claims are tilted toward higher return equities. The excess return is large and positive in normal times but large and negative during global crises, reflecting the global insurance role of the US external balance sheet. Controlling for issuer’s nationality, we find that US investors have a larger exposure to equity issued by Asia-headquartered corporations than reported in the aggregate statistics. Finally, equity portfolios are concentrated in ’superstar’ firms, but for US liabilities foreign holdings are less concentrated than the overall market.

Subject: Bonds, Exchange rates, Financial crises, Financial institutions, Foreign exchange, Global financial crisis of 2008-2009, Securities

Keywords: Bonds, Caribbean, Crises, Equity portfolio, Equity share, Excess return, Exchange rates, Exorbitant privilege, Global, Global financial crisis of 2008-2009, Higher-return equities, Offshore centers, Portfolio composition, Securities, Superstar firms

Publication Details

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