Existing studies of country funds utilize return measures and do not consider the effects of investor risk specifically. We examine the time-varying asymmetric investor risk hypothesis for country fund premiums and find that volume and volatility in both the U.S. and foreign markets are generally important. While the U.S. volume and volatility are more important than similar foreign variables o...

We set up a two-country, regional model of trade in financial services. Competitive firms in each country manufacture untraded consumer goods in an uncertain productive environment, borrowing funds from a bank in either the home or the foreign market. Duopolistic banks can choose their levels of monitoring of firms and thus the levels of risk-taking, where the risk of bank failure is partly bor...