This article empirically studies the macroeconomic impact of valuation effects for a sample of 53 countries over 1980-2010. For high-income countries, the paper finds that valuation effects operate as a consumption risk-sharing channel. For emerging market economies (EMEs), the results depend on how valuation effects correlate with domestic consumption growth. Valuation effects act as a risk-sharing channel only if the correlation is negative, and are destabilizing otherwise. Consequently, the degree of risk sharing has improved in the former type of EMEs and worsened in the latter. Differences in the international portfolio composition between the two EME-groups explain this disparate experience.