Replication data for: Hedging against the Government: A Solution to the Home Asset Bias Puzzle
- Berriel, Tiago C.
- Bhattarai, Saroj
AbstractWe explain why international nominal bonds and equity portfolios are biased domestically. In our model, holding domestic government nominal debt provides a hedge against shocks to bond returns and the impact on taxes they induce. For this result, only two features are essential: nominal risk and taxes only on domestic agents. A third feature explains domestically biased equity holdings: government spending falls on domestic goods. Then, an increase in government spending raises the returns on domestic equity, providing a hedge against the subsequent increase in taxes. A calibrated version of the model predicts asset holdings that quantitatively match the data. (JEL F30, G11, G15, H61, H63)
Is supplement to
DOI: 10.1257/mac.5.1.102 (Text)
Berriel, Tiago C, and Saroj Bhattarai. “Hedging Against the Government: A Solution to the Home Asset Bias Puzzle.” American Economic Journal: Macroeconomics 5, no. 1 (January 2013): 102–34. https://doi.org/10.1257/mac.5.1.102.
- ID: 10.1257/mac.5.1.102 (DOI)
Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2019-10-13