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Country-specific equity market characteristics and foreign equity portfolio allocation

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  • Thapa, Chandra
  • Poshakwale, Sunil S.

Abstract

Do country-specific equity market characteristics explain variations in foreign equity portfolio allocation? We study this question using comprehensive foreign equity portfolio holdings data and different measures of country-specific equity market factors for 36 host countries. Employing panel data econometric estimations, our investigation shows that foreign investors prefer to invest more in larger and highly visible developed markets which are more liquid, exhibit a higher degree of market efficiency and have lower trading costs. The findings imply that by improving the preconditions necessary for well-functioning capital markets, policymakers should be able to attract higher levels of foreign equity portfolio investments.

Suggested Citation

  • Thapa, Chandra & Poshakwale, Sunil S., 2012. "Country-specific equity market characteristics and foreign equity portfolio allocation," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 189-211.
  • Handle: RePEc:eee:jimfin:v:31:y:2012:i:2:p:189-211
    DOI: 10.1016/j.jimonfin.2011.10.011
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    Cited by:

    1. repec:eee:riibaf:v:42:y:2017:i:c:p:544-558 is not listed on IDEAS
    2. Kyungkeun Kim & Dongwon Lee, 2017. "Equity Market Globalization and Portfolio Rebalancing," Working Papers 2017-17, Economic Research Institute, Bank of Korea.
    3. Diana Muresan, 2012. "Retrospective Of Financial Reporting On Capital Market," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-8.
    4. repec:eco:journ1:2017-02-60 is not listed on IDEAS

    More about this item

    Keywords

    Foreign equity portfolio allocations; Stock market development; Panel data models;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F3 - International Economics - - International Finance

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