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International Portfolio Investment: Theory, Evidence, and Institutional Framework

Author

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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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    Cited by:

    1. Lee, Hsiang-Tai & Tsang, Wei-Lun, 2011. "Cross hedging single stock with American Depositary Receipt and stock index futures," Finance Research Letters, Elsevier, vol. 8(3), pages 146-157, September.
    2. Panayiotis Alexakis & Anna Vasila, 2010. "Equity Interconnections in Major European Markets," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 109-132.
    3. Jia Xu & Longbing Cao, 2023. "Copula Variational LSTM for High-dimensional Cross-market Multivariate Dependence Modeling," Papers 2305.08778, arXiv.org.
    4. al Bdiwy, Feras & Masih, Mansur, 2017. "The lead-lag relationship among select regional islamic equity markets," MPRA Paper 104973, University Library of Munich, Germany.
    5. Adugna Olani, 2016. "Dynamic Capital Inflow Transmission Of Monetary Policy To Emerging Markets," Working Paper 1358, Economics Department, Queen's University.
    6. Ardliansyah, Rifqi, 2012. "Stock Market Integration and International Portfolio Diversification between U.S. and ASEAN Equity Markets," MPRA Paper 41958, University Library of Munich, Germany.
    7. 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.
    8. Shafiu ABDULLAHI, 2017. "Stock Market Linkage Financial Contagion and Assets Price Movements Evidence from Nigerian Stock Exchange," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 8(2), pages 146-159.
    9. Lagoarde-Segot, Thomas & Lucey, Brian M., 2007. "International portfolio diversification: Is there a role for the Middle East and North Africa?," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 401-416, December.
    10. Fuinhas, José Alberto & Marques, António Cardoso & Nogueira, David Coito, 2014. "Análise VAR dos índices bolsistas SP500, FTSE100, PSI20, HSI e IBOVESPA [Integration of the indexes SP500, FTSE100, PSI20, HSI and IBOVESPA: A VAR approach]," MPRA Paper 62092, University Library of Munich, Germany, revised 10 Feb 2015.
    11. HOROBET Alexandra & BELASCU Lucian, 2014. "An Analysis Of The Diversification Potential Of Emerging Markets For International Equity Portfolios In Recent Years," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 66(5), pages 15-30.
    12. Söhnke M. Bartram & Harald Lohre & Peter F. Pope & Ananthalakshmi Ranganathan, 2021. "Navigating the factor zoo around the world: an institutional investor perspective," Journal of Business Economics, Springer, vol. 91(5), pages 655-703, July.
    13. Poshakwale, Sunil S. & Aquino, Katty Pérez, 2008. "The dynamics of volatility transmission and information flow between ADRs and their underlying stocks," Global Finance Journal, Elsevier, vol. 19(2), pages 187-201.
    14. Shegorika Rajwani & Dilip Kumar, 2019. "Measuring Dependence Between the USA and the Asian Economies: A Time-varying Copula Approach," Global Business Review, International Management Institute, vol. 20(4), pages 962-980, August.
    15. Katja Funke & Georg Stadtmann, 2004. "Operations of a Pension Fund after the Asian Crisis: The Thai Experience," Asian Economic Journal, East Asian Economic Association, vol. 18(4), pages 439-470, December.
    16. repec:bcp:journl:v:9:y:2025:i:11:p:472-483 is not listed on IDEAS
    17. Sehgal, Sanjay & Gupta, Priyanshi & Deisting, Florent, 2014. "Assessing Time-Varying Stock Market Integration in EMU for Normal and Crisis Periods," MPRA Paper 64078, University Library of Munich, Germany.
    18. Hu, Jian, 2008. "Dependence Structures in Chinese and U.S. Financial Markets -- A Time-varying Conditional Copula Approach," MPRA Paper 11401, University Library of Munich, Germany.
    19. repec:idn:journl:v:17:y:2015:i:4:p:1-30 is not listed on IDEAS
    20. Doina Chichernea, 2007. "International Portfolio Investment," Journal of Information Systems & Operations Management, Romanian-American University, vol. 1(1), pages 15-20, Winter.
    21. Alexandrou, George & Koulakiotis, Athanasios & Dasilas, Apostolos, 2011. "GARCH modelling of banking integration in the Eurozone," Research in International Business and Finance, Elsevier, vol. 25(1), pages 1-10, January.
    22. Bossman, Ahmed & Agyei, Samuel Kwaku, 2022. "Interdependence structure of global commodity classes and African equity markets: A vector wavelet coherence analysis," Resources Policy, Elsevier, vol. 79(C).
    23. Bartram, Sohnke M. & Taylor, Stephen J. & Wang, Yaw-Huei, 2007. "The Euro and European financial market dependence," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1461-1481, May.
    24. Wang, Kehluh & Chen, Yi-Hsuan & Huang, Szu-Wei, 2011. "The dynamic dependence between the Chinese market and other international stock markets: A time-varying copula approach," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 654-664, October.

    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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