Why don\'t Asians invest in Asia:The determinants of cross-border portfolio holdings
AbstractThis paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyse empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies; emerging market economies; European economies; and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 0908.
Length: 25 pages
Date of creation: Apr 2009
Date of revision:
Cross-border portfolio investment; regional financial integration; gravity model;
Other versions of this item:
- Alicia García-Herrero & Philip Wooldridge & Doo Yong Yang, 2009. "Why Don't Asians Invest in Asia? The Determinants of Cross-Border Portfolio Holdings," Asian Economic Papers, MIT Press, vol. 8(3), pages 228-246, October.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-11 (All new papers)
- NEP-IFN-2010-04-11 (International Finance)
- NEP-SEA-2010-04-11 (South East Asia)
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- Yohei Okawa & Eric van Wincoop, 2010.
"Gravity in International Finance,"
072010, Hong Kong Institute for Monetary Research.
- Olaf Unteroberdoerster & Runchana Pongsaparn, 2011. "Financial Integration and Rebalancing in Asia," IMF Working Papers 11/243, International Monetary Fund.
- Azis, Iwan J., 2013. "Inadequate Regional Financial Safety Nets Reflect Complacency," ADBI Working Papers 411, Asian Development Bank Institute.
- Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp346, IIIS.
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