WORKING PAPER SERIES
NO 883 / MARCH 2008
ASSESSING THE BENEFITS
OF INTERNATIONAL
PORTFOLIO
DIVERSIFIC ATION IN
BONDS AND STOCKS
by Rober to A. De Santis
and Lucio Sarno
Format: (210.00
x 297.00 mm);
Date: Mar 13,
2008 16:49:21;
Output Profile:
SPOT ISO Coated
v2 (ECI); Preflight:
Failed
WORKING PAPER SERIES
NO 883 / MARCH 2008
In 2008 all ECB
publications
feature a motif
taken from the
10 banknote.
ASSESSING THE BENEFITS
OF INTERNATIONAL PORTFOLIO
DIVERSIFICATION IN BONDS
AND STOCKS
1
by Roberto A. De Santis
2

part, is permitted only with the explicit
written authorisation of the ECB or the
author(s).
The views expressed in this paper do not
necessarily refl ect those of the European
Central Bank.
The statement of purpose for the ECB
Working Paper Series is available
from the ECB website, .
europa.eu/pub/scientifi c/wps/date/html/
index.en.html
ISSN 1561-0810 (print)
ISSN 1725-2806 (online)
3
ECB
Working Paper Series No 883
March 2008
Abstract
4
Non-technical summary
5
1 Introduction
7
2 A factor pricing model of
exchange rates, bonds and stocks
10
2.1 Setup
10
2.2 Uncovered interest rate parity
11

22
6 Concluding remarks
23
References
25
Tables and fi gures
29
European Central Bank Working Paper Series
41
CONTENTS
4
ECB
Working Paper Series No 883
March 2008
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Working Paper Series No 883
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ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
March 2008
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ECB
Working Paper Series No 883
March 2008
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Working Paper Series No 883
March 2008
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