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International Portfolio Investment: Theory, Evidence, and Institutional Framework

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  • Söhnke M. Bartram
  • Gunter Dufey

Abstract

At first sight, the idea of investing internationally seems exciting and full of promise because of the many benefits of international portfolio investment. By investing in foreign securities, investors can participate in the growth of other countries, hedge their consumption basket against exchange rate risk, realize diversification effects and take advantage of market segmentation on a global scale. Even though these advantages might appear attractive, the risks of and constraints for international portfolio investment must not be overlooked. In an international context, financial investments are not only subject to currency risk and political risk, but there are many institutional constraints and barriers, significant among them a host of tax issues. These constraints, while being reduced by technology and policy, support the case for internationally segmented securities markets, with concomitant benefits for those who manage to overcome the barriers in an effective manner.

Suggested Citation

  • Söhnke M. Bartram & Gunter Dufey, 2001. "International Portfolio Investment: Theory, Evidence, and Institutional Framework," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 10(3), pages 85-155, August.
    • Handle: RePEc:wly:finmar:v:10:y:2001:i:3:p:85-155
    DOI: 10.1111/1468-0416.00043
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    10. Thomas Lagoarde-Segot & Brian M. Lucey, 2006. "Portfolio allocations in the Middle East and North Africa," The Institute for International Integration Studies Discussion Paper Series iiisdp141, IIIS.
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    16. Jia Xu & Longbing Cao, 2023. "Copula Variational LSTM for High-dimensional Cross-market Multivariate Dependence Modeling," Papers 2305.08778, arXiv.org.
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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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