International Finance Discussion Papers (IFDP)

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February 2011

U.S. International Equity Investment and Past Prospective Returns

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

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.

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Keywords: Momentum, contrarian, portfolio performance measures, international returns

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Last Update: July 10, 2020