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International investment positions and risk sharing: an empirical analysis on the coordinated portfolio investment survey

  • Pericoli, Filippo
  • Pierucci, Eleonora
  • Ventura, Luigi

By using data from all available waves of the IMF Coordinated Portfolio In- vestment Surveys, we explore the dynamics of the determinants of cross portfolio investments. The main aim of our analysis, however, is to understand whether a diversification motive can also be found, among the various determinants. We find strong evidence that, indeed, the correlation between the idiosyncratic components of gdp growth, as well as the correlation between stock returns between pair of coun- tries, that we consider as proxies for diversification, are relevant to explain bilateral portfolio holdings, when unobserved heterogeneity is properly taken into account, by means of a fixed effect, panel estimation (where the fixed effects refer to pair of countries, rather than countries in isolation). Interestingly, the same results, cannot be retrieved from cross section estimations. It also turns out that the diversification motive is less relevant, if at all, in choosing whether or not to invest in a particular area.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33071.

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Date of creation: 28 Aug 2011
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Handle: RePEc:pra:mprapa:33071
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  1. Domenico Giannone & Lucrezia Reichlin, 2005. "Trends and cycles in the Euro Area: how much heterogeneity and should we worry about it?," Macroeconomics 0511016, EconWPA.
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  11. Claudia M. Buch, 2000. "Are Banks Different? Evidence from International Data," Kiel Working Papers 1012, Kiel Institute for the World Economy.
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  14. Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000. "Information costs and home bias: an analysis of U.S. holdings of foreign equities," International Finance Discussion Papers 691, Board of Governors of the Federal Reserve System (U.S.).
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  16. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
  17. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
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