Assessing the potential for further foreign demand for U.S. assets
Subtitle: has financing U.S. current account deficits made foreign investors overweight in U.S. securities?
By: Carol C. Bertaut.
Series: International finance discussion papers -- no. 950; International finance discussion papers (Online) -- no. 950.
Publisher: Federal Reserve Board
Published: 2008
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "Since 2001, foreign investors have acquired roughly $5 trillion in U.S.  securities--more than doubling their holdings of U.S.  equities and bonds--as both official and private inflows have financed record U.S.  current account deficits.  Although the rapid growth of foreign holdings of U.S.  securities raises concerns that foreign investors may have become too heavily weighted in U.S.  assets, foreign investors have not in fact materially changed the relative allocations between U.S.  and other foreign securities in their portfolios in recent years.  Based on data from the most recent comprehensive surveys of foreign portfolio investment, the 2006 IMF Coordinated Portfolio Investment Surveys (CPIS), most foreign investors remain relatively more underweight in both U.S.  equities and bonds than they do in foreign securities in general.  Although the underweight position suggests that there remains potential for foreign investors to continue to acquire U.S.  securities, econometric evidence indicates that the underweight position itself reflects a preference by foreign investors for securities of countries with which they have strong economic or cultural ties, consistent with recent research that suggests "location" or "information" preferences in both domestic and international portfolios.  As securities markets abroad continue to deepen, such factors are likely to continue to attract investment from "nearby" markets, especially from European investors"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 6/18/2009.

Includes bibliographical references.

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