International Portfolio Diversification and Labor/leisure Choice

Download or read book International Portfolio Diversification and Labor/leisure Choice written by Urban J. Jermann and published by . This book was released on 1998 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: When marginal utility of consumption depends on leisure, investors will take this into account when allocating their wealth among different assets. This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor-leisure and consumption are chosen endogenously. We use this framework to study the effect of leisure for optimal international diversification. We find that in the symmetric case the model's ability to help explain home-bias depends crucially on the level of substitutability between consumption and leisure.