Essays on the Determinants of International Portfolio Investments

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Title: Essays on the Determinants of International Portfolio Investments
Author: Al-Khail, Mohammed Aba
Other contributor: Svenska handelshögskolan, Institutionen för finansiell ekonomi och ekonomisk statistik, finansiell ekonomi
Swedish School of Economics and Business Administration, Department of Finance and Statistics, Finance
Publisher: Svenska handelshögskolan
Date: 2003-08-29
Language: en
Number of pages: 1837 bytes
Belongs to series: Economics and Society - 114
ISBN: 951-555-775-5
Thesis level: Doctoral thesis
Abstract: Investors significantly overweight domestic assets in their portfolios. This behavior which is commonly called “home bias” contradicts the prescriptions of portfolio theory. This thesis explores potential reasons for the “home bias” by examining the characteristics of the investing and the target countries and features of the interaction between them. A common theme of the four essays is a focus on the importance of information about foreign markets in explaining the share of these markets in investors’ portfolios. The results indicate that the size of the equity ownership in another country strongly relates to the distance to the financial capital of that country, and to trade in goods with and direct investments (FDI) to that country. The first essay empirically investigates the relationship between trade in real goods and portfolio investments. Overall, the evidence indicates a substantial role for trade in reducing the information cost relating to portfolio investments. The second essay examines the implications of the launch of the European Monetary Union (EMU) on international portfolio investments. The evidence on the allocation of Finnish international portfolio investments is more consistent with an information-based than a diversification motive explanation. The third essay employs new data for a large number of countries and further explores the role of trade on international portfolio investments. The results indicate that trade provides important information especially on firms in countries in which the corporate governance structure and the information environment of firms generate less reliable information. The fourth essay examines the relationship between direct investments (FDI) and portfolio investments. In contrast to the predications of portfolio theory, it provides evidence that FDI is a complement rather than a substitute for portfolio investments.
Subject: emu
financial markets
foreign direct investment
gravity model
information asymmetry
international portfolio investments
international trade
multinational firms
Rights: Publikationen är skyddad av upphovsrätten. Den får läsas och skrivas ut för personligt bruk. Användning i kommersiellt syfte är förbjuden.

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