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International Portfolio Investment: Theory, Evidence, and Institutional Framework

  • Sohnke M. Bartram

    (Maastricht University)

  • Gunter Dufey

    (University of Michigan)

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, inves-tors can participate in the growth of other countries, hedge their consumption basket against ex-change 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, finan-cial investments are not only subject to currency risk and political risk, but there are many institu-tional 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.

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File URL: http://128.118.178.162/eps/fin/papers/0107/0107001.pdf
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Paper provided by EconWPA in its series Finance with number 0107001.

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Length: 124 pages
Date of creation: 12 Jul 2001
Date of revision:
Handle: RePEc:wpa:wuwpfi:0107001
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 124 ; figures: included. forthcoming in: Financial Markets, Institutions and Instruments, Vol. 10 (3), August 2001, 85-155
Contact details of provider: Web page: http://128.118.178.162

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  1. Adler, Michael & Dumas, Bernard, 1975. "Optimal International Acquisitions," Journal of Finance, American Finance Association, vol. 30(1), pages 1-19, March.
  2. Agmon, Tamir & Lessard, Donald R, 1977. "Investor Recognition of Corporate International Diversification," Journal of Finance, American Finance Association, vol. 32(4), pages 1049-55, September.
  3. Adler, Michael & Prasad, Bhaskar, 1992. "On Universal Currency Hedges," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 19-38, March.
  4. Adler, Michael, 1981. "Investor Recognition of Corporation International Diversification: Comment," Journal of Finance, American Finance Association, vol. 36(1), pages 187-90, March.
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