Working Paper
The stability of large external imbalances: the role of returns differentials
Curcuru, Stephanie E.; Warnock, Francis E.; Dvorak, Tomas (2007)
Were the U.S. to persistently earn substantially more on its foreign investments (?U.S. claims?) than foreigners earn on their U.S. investments (?U.S. liabilities?), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases. However, utilizing data on the actual foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential of U.S. claims over U.S. liabilities is essentially zero. Ending our sample in 2005, the differential is positive, whereas ...
International Finance Discussion Papers , Paper 894

Working Paper
Cross-border returns differentials
Curcuru, Stephanie E.; Warnock, Francis E.; Dvorak, Tomas (2008)
Were the U.S. to persistently earn substantially more on its foreign investments ("U.S. claims") than foreigners earn on their U.S. investments ("U.S. liabilities"), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases. However, using a monthly dataset on the foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is near zero, far smaller than previously reported. Examining all U.S. claims and liabilities ...
International Finance Discussion Papers , Paper 921

Working Paper
Cross-border returns differentials
Curcuru, Stephanie E.; Warnock, Francis E.; Dvorak, Tomas (2007)
Were the U.S. to persistently earn substantially more on its foreign investments ("U.S. claims") than foreigners earn on their U.S. investments ("U.S. liabilities"), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases. However, we find that the returns differential of U.S. claims over U.S. liabilities is far smaller than previously reported and, importantly, is near zero for portfolio equity and debt securities. ; > For portfolio securities, we confirm our finding using a separate dataset on the actual foreign equity and bond ...
Globalization Institute Working Papers , Paper 04

Working Paper
Decomposing the U.S. external returns differential
Curcuru, Stephanie E.; Warnock, Francis E.; Dvorak, Tomas (2009)
We decompose the returns differential between U.S. portfolio claims and liabilities into the composition, return, and timing effects. Our most striking and robust finding is that foreigners exhibit poor timing when reallocating between bonds and equities within their U.S. portfolios. The poor timing of foreign investors--caused primarily by deliberate trading, not a lack of portfolio rebalancing--contributes positively to the U.S. external returns differential. We find no evidence that the poor timing is driven by mechanical reserve accumulation by emerging market countries; rather, it is ...
International Finance Discussion Papers , Paper 977