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Institutional Determinants of International Equity Portfolios - A Country-Level Analysis

  • Barbara Berkel
Published/Copyright: October 2, 2007
The B.E. Journal of Macroeconomics
From the journal The B.E. Journal of Macroeconomics Volume 7 Issue 1

Despite large potential gains, international equity investment is less diversified across countries than predicted by the international version of the traditional capital asset pricing model (ICAPM). This paper provides empirical evidence on the impact of capital market frictions on international equity portfolios using data on bilateral equity holdings. Two important findings are reported: First, besides a home bias in equities, a 'friendship bias' can be observed for some country pairs. Second, indirect barriers such as the degree of financial market development and especially information asymmetries have strong explanatory power, whereas direct barriers such as capital flow restrictions have no impact.

Keywords: international portfolio diversification; capital market frictions; financial market development; information asymmetries; ICAPM; bilateral equity holdings
Published Online: 2007-10-2

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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  1. Topics Article
  2. To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
  3. Economic Growth: A Channel Decomposition Exercise
  4. Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
  5. Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
  6. A Simple Wicksellian Macroeconomic Model
  7. Confidence-Enhanced Economic Growth
  8. A Positive Analysis of Targeted Employment Protection Legislation
  9. The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
  10. Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
  11. Does Permanent Income Determine the Vote?
  12. Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
  13. Savers, Spenders and Fiscal Policy in a Small Open Economy
  14. Assessing Sign Restrictions
  15. Euro Area Inflation Differentials
  16. Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
  17. Gold, Fiat Money, and Price Stability
  18. Housing Tenure and Wealth Distribution in Life Cycle Economies
  19. Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
  20. Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
  21. Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
  22. Contributions Article
  23. The Arrow Effect under Competitive R&D
  24. Openness, Wage Floors and Technology Change
  25. Explaining the Evidence on Inequality and Growth: Informality and Redistribution
  26. Nominal Debt Dynamics, Credit Constraints and Monetary Policy
  27. TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
  28. A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
  29. Specialization Patterns and the Factor Bias of Technology
  30. Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
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  32. A Macroeconomic Model of Entry with Exporters and Multinationals
  33. The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
  34. Advances Article
  35. Stable Sunspot Equilibria in a Cash-in-Advance Economy
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https://doi.org/10.2202/1935-1690.1388
Keywords for this article
international portfolio diversification; capital market frictions; financial market development; information asymmetries; ICAPM; bilateral equity holdings

Articles in the same Issue

  1. Topics Article
  2. To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
  3. Economic Growth: A Channel Decomposition Exercise
  4. Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
  5. Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
  6. A Simple Wicksellian Macroeconomic Model
  7. Confidence-Enhanced Economic Growth
  8. A Positive Analysis of Targeted Employment Protection Legislation
  9. The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
  10. Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
  11. Does Permanent Income Determine the Vote?
  12. Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
  13. Savers, Spenders and Fiscal Policy in a Small Open Economy
  14. Assessing Sign Restrictions
  15. Euro Area Inflation Differentials
  16. Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
  17. Gold, Fiat Money, and Price Stability
  18. Housing Tenure and Wealth Distribution in Life Cycle Economies
  19. Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
  20. Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
  21. Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
  22. Contributions Article
  23. The Arrow Effect under Competitive R&D
  24. Openness, Wage Floors and Technology Change
  25. Explaining the Evidence on Inequality and Growth: Informality and Redistribution
  26. Nominal Debt Dynamics, Credit Constraints and Monetary Policy
  27. TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
  28. A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
  29. Specialization Patterns and the Factor Bias of Technology
  30. Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
  31. ICT and Productivity Resurgence: A Growth Model for the Information Age
  32. A Macroeconomic Model of Entry with Exporters and Multinationals
  33. The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
  34. Advances Article
  35. Stable Sunspot Equilibria in a Cash-in-Advance Economy
  36. Should Monetary Policy Use Long-Term Rates?
  37. Habit Formation and Aggregate Consumption Dynamics
  38. Factor Utilization and the Real Impact of Financial Crises
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