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Does Regulatory Harmonization Increase Bilateral Asset Holdings?

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  • Vlachos, Jonas

Abstract

By combining new data on bilateral asset holdings with data on securities regulation in an empirical gravity model, it is found that bilateral differences in securities regulation lead to decreased portfolio holdings. Hence, regulatory harmonization can foster financial integration. The results are especially strong for equity holdings. It is verified that the results do not just reflect general economic, institutional, and cultural differences. Additional analysis of causality shows the exogenous component of asset holdings to be associated with larger differences in securities regulation. This might suggest that regulatory differences are used to protect domestic capital markets from outside competition.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4417.

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Date of creation: Jun 2004
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Handle: RePEc:cpr:ceprdp:4417

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Keywords: cross-border portfolio investments; gravity model; harmonization; home bias; integration; securities;

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References

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Citations

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Cited by:
  1. Coeurdacier , Nicolas & Martin, Philippe, 2007. "The geography of asset holdings: Evidence from Sweden," Working Paper Series 202, Sveriges Riksbank (Central Bank of Sweden).
  2. Coeurdacier, Nicolas & Guibaud, Stéphane, 2011. "International portfolio diversification is better than you think," Journal of International Money and Finance, Elsevier, vol. 30(2), pages 289-308, March.
  3. Giofré, Maela, 2013. "International diversification: Households versus institutional investors," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 145-176.
  4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Cultural Biases in Economic Exchange?," Economics Working Papers ECO2007/42, European University Institute.
  5. Giofré, Maela/M., 2009. "Investor protection and foreign stakeholders," MPRA Paper 20238, University Library of Munich, Germany, revised Jan 2010.
  6. Barbara Berkel, 2004. "Institutional Determinants of International Equity Portfolios - A Country-Level Analysis," MEA discussion paper series 04061, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  7. Giofré, Maela, 2013. "Investor protection rights and foreign investment," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 506-526.
  8. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series iiisdp265, IIIS.
  9. Abid, Fathi & Bahloul, Slah, 2011. "Selected MENA countries' attractiveness to G7 investors," Economic Modelling, Elsevier, vol. 28(5), pages 2197-2207, September.
  10. 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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