Resource title

The Introduction of the Euro and its Effects on Investment Decisions

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Resource description

In this paper we examine changes on investment decisions induced by the introduction of the Euro. There are two potential sources of portfolio reallocation. First, the introduction of the Euro diminished exchange rate risks within the EMU region, which relieved European investors from currency risk associated with intra-EMU investments. Second, monetary policy has been bundled within one single institution, which increased the correlation of different national stock and bond market returns. We test for structural breaks in the portfolio holdings of German investors and estimate a market model in the latter in order to account for the two described effects. We observe a significant decrease in national and an significant increase in intra-EMU as well as US investments. Therefore, the establishment of the EMU led to a decrease of investment home bias.

Resource author

Rainer Haselmann, Herwartz Helmut

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Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/22001

Resource license

Adapt according to the presented license agreement and reference the original author.