U.S. international equity investment and past prospective returns

Curcuru, Stephanie E.; Thomas, Charles P.; Warnock, Francis E.; Wongswan, Jon

Working Paper

U.S. international equity investment and past prospective returns

Abstract: Counter to extant stylized facts, using newly available data on country allocations in U.S. investors' foreign equity portfolios we find that (i) U.S. investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and (ii) U.S. investors increase portfolio weights on a country's equity market just prior to its strong performance, behavior inconsistent with an informational disadvantage. Over the past two decades, U.S. investors' foreign equity portfolios outperformed a value-weighted foreign benchmark by 160 basis points per year.

Keywords: Investments, Foreign; Portfolio management;