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Paul Ehling

25 January 2005
WORKING PAPER SERIES - No. 425
Details
Abstract
This research addresses whether geographic diversification provides benefits over industry diversification. In the absence of constraints, no empirical evidence is found to support the argument that country diversification is superior. With short-selling constraints, however, the geographic tangency portfolio is not attainable by industry portfolios. Results with upper and lower constraints on portfolio weights as well as an out-of-sample analysis show that geographic diversification almost consistently outperforms industry portfolios, although we cannot establish statistical significance.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
Network
ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe"
27 September 2007
WORKING PAPER SERIES - No. 815
Details
Abstract
We analyse the inter-linkages between foreign direct investment (FDI) and foreign portfolio investment (FPI) between Germany and the major economies. First, we show that Tobin's q helps explaining the variation of the growth rate of the stock of FDI. Second, we show that foreign and the home stock market returns explain the variation of the growth rate of the stock of FPI. Most importantly, we find that information about foreign fundamentals is revealed via direct investment. In other words, FDI transactions measured by fitted growth rates of the stock of FDI help explaining current growth rates of the stock of FPI. To our knowledge this observation is the first unambiguous evidence that international portfolio investors follow firms' expected foreign investment decisions.
JEL Code
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
Network
ECB Lamfalussy Fellowship Programme