these projects. philip then challenges a number of general predictions about the macroeconomic impact of financial integration on the financial development of euro - area countries, international risk sharing and net capital movements. home bias to complement philip ’ s findings on financial integration in bond and equity markets, i would like to focus on one issue of great importance : to what extent has investors ’ home bias changed over the past decade? using german data it can be shown nicely, first, that home bias has declined and second, that emu plays a prominent role in how the portfolios of german investors are diversified internationally. home bias : some findings for germany z the home bias of german investors has declined z emu plays a prominent role in how the portfolios of german investors are diversified internationally. this is due to – decline in transaction costs – harmonisation of financial market institutions ( fsap ) – improved information on foreign investments 13 november 2008 comments on papers by p. lane and s. kalemli - ozcan et al. 4 of 10 to start with some theory, solnik ’ s 1 ( 1974 ) international capital asset pricing model predicts – given there are no transaction costs – that the regional diversification of a securities portfolio should be the same in all countries worldwide and it should copy the structure of the global portfolio. in reality, the portfolios in all countries show divergences from this “ benchmark portfolio ” in favour of domestic securities ; this “ home bias ” can be explained by transaction costs and imperfect information, in particular, concerning foreign securities. in the euro area, transaction costs should have declined significantly with the abolition of exchange rate movements within the european monetary union and further initiatives for harmonising the financial market institutions by the financial services action plan ( fsap ). at the same time, information on foreign investments can be expected to have improved within emu. to see whether these predictions are true, i shall now investigate the regional structure of the german international investment position. german investors ’ preference for solnik, b., an equilibrium model of the international capital markets, journal of economic theory, 8, 1974, p. 500 - 524. domestic securities is calculated by comparing the share of actual foreign assets held by german investors with the percentage of foreign assets in the global benchmark portfolio. 2 against this backdrop, home bias on the assets side indicates whether foreign securities are less intensively ( and domestic securities are more strongly ) represented in the national portfolio compared with the benchmark. a

now, even about the mandate of the central bank. however, we do not yet know for sure how the markets will function in the future. when discussing how monetary policy should potentially respond to changes in the markets, we thus caution against making hasty prior assumptions. this is because those parties who have previously achieved a degree of success with stability policy – and this goes for both the eurosystem as well as the bundesbank in the decades before – will recommend taking careful, well - thought - out steps in these discussions. we are closely monitoring changes in the markets, whilst also making sure that we do not lose sight of monetary policy ’ s big picture : price stability. price stability will remain our anchor – irrespective of old or new normal. thank you for your attention. 1 forward guidance is one of the ecb ’ s methods for communicating the longer - term orientation of monetary policy. the ecb switched to this form of steering expectations in 2013 in order to counter undesired developments in the markets. 6 / 6 bis central bankers'speeches