The most effective exterior wall construction to protect a home from moisture, air infiltration and energy loss includes a layer of rigid foam installation on the exterior of the wall surface. Studs account for nearly 25 percent of the wall surface and without rigid foam installation on the exterior a condition known as thermal bridging occurs. Thermal bridging means that where the bridge occurs there is practically no insulation value. So for exterior walls built with studs only or studs with OSB or plywood on the exterior, thermal bridging occurs at each stud. By using a continuous rigid foam on the exterior over the studs thermal bridging is significantly reduced.
In addition to reducing thermal bridging, rigid foam also helps reduce the amount of moisture in the wall. Moisture in our homes (water vapor in the air, not rain) is always migrating through the walls of the house either from the outside in or the inside out depending on the season. Ideally the moisture should not get trapped in the wall. During the winter months the warm moist air in your home migrates through the walls to the exterior. As it migrates through the wall it will condense when it hits a cold surface. When an exterior wall is built with studs and OSB often this condensation occurs on the inside surface of the OSB trapping the moisture in the wall. If severe this can lead to mold. On walls built with rigid foam the moisture is less likely to condense on the inside of the rigid foam because the temperature on the house side of the foam is much higher than the outside temperature unlike the cold OSB surface. This reduces the amount of moisture that will condense inside the wall system and results in the condensation occurring on the exterior surface of the rigid foam instead which is exactly where you want it.
Another benefit of rigid foam insulation is that it reduces air infiltration into the house. Most people think that the best way to make a house more energy efficient is to increase the R-value of the insulation in the walls and ceiling. But equally if not more important is to reduce the amount of air that leaks into and out of the house by sealing up holes in the walls and ceiling. A continuous rigid insulation in combination with foam sealants and caulk around penetrations like windows, doors, vents, and other penetrations reduces air infiltration thereby increasing the efficiency and comfort.
Building exterior walls using continuous rigid foam on the exterior costs more than using OSB, but the cost is worth it. The wall performs better with respect to energy efficiency, air infiltration and reduced moisture in the wall cavity; resulting in a more comfortable better built home.