Why Don't Asians Invest in Asia? The Determinants of Cross-Border Portfolio Holdings

2009 ◽  
Vol 8 (3) ◽  
pp. 228-246 ◽  
Author(s):  
Alicia García-Herrero ◽  
Philip Wooldridge ◽  
Doo Yong Yang
Keyword(s):  
Financial Markets ◽  
Financial Integration ◽  
Emerging Market ◽  
Trade Flows ◽  
Asia Pacific ◽  
Portfolio Holdings ◽  
Cross Border ◽  
Advanced Industrial Economies ◽  
European Economies ◽  
Source Countries

This paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyze empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies, emerging market economies, European economies, and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region.

scholarly journals The Coming Wave: Where Do Emerging Market Investors Put Their Money?

2019 ◽  
Vol 55 (4) ◽  
pp. 1369-1414 ◽  
Author(s):  
G. Andrew Karolyi ◽  
David T. Ng ◽  
Eswar S. Prasad
Keyword(s):  
Emerging Market ◽  
Explanatory Power ◽  
Foreign Market ◽  
Trade Flows ◽  
Foreign Country ◽  
Portfolio Holdings ◽  
Level Data ◽  
International Portfolio ◽  
Information Advantage ◽  
Parent Companies

Using country- and institution-level data, we find that the “coming wave” of emerging- market (EM) investors systematically over- or underweight their equity portfolio holdings in a way that reflects the influences of past capital and trade flows from a foreign country. We interpret this finding as support for van Nieuwerburgh and Veldkamp (2009) information endowment hypothesis. Strong past capital and trade flows create an information advantage that leads EM investors to disproportionately overweight a given foreign market, even relative to developed market investor counterparts. We also pursue predictions of the information endowment hypothesis by constructing novel information-advantage proxies based on relationships among investment firms and the headquarters of their parent companies. These proxies also offer reliable explanatory power for international portfolio allocations.

Can Cross-Border Funding Frictions Explain Financial Integration Reversals?

2021 ◽  
Author(s):  
Amir Akbari ◽  
Francesca Carrieri ◽  
Aytek Malkhozov
Keyword(s):  
Capital Flows ◽  
Stock Prices ◽  
Market Integration ◽  
Financial Integration ◽  
International Investment ◽  
Global Market ◽  
International Capital ◽  
Portfolio Holdings ◽  
Cross Border ◽  
Investment Barriers

Abstract We show that constraints on using leverage for foreign positions can act as an international investment barrier. Guided by an international CAPM with leverage constraints, we use observed stock prices to measure the variation in the magnitude and the implicit cost of such cross-border funding barriers. Our measure helps explain the dynamics of global market integration and, in particular, its reversals documented in the literature, but not explained by other international investment barriers. We confirm our results using alternative financial integration measures, international capital flows, and institutional portfolio holdings.

Foreign Direct Investment

2017 ◽  
Author(s):  
Yilmaz Akyüz
Keyword(s):  
Foreign Direct Investment ◽  
Mergers And Acquisitions ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Direct Investment ◽  
Balance Of Payments ◽  
Productive Capacity ◽  
Cross Border ◽  
Direct Contribution ◽  
High Profit

Recent years have also seen increased openness of EDEs to foreign direct investment (FDI) in search for faster growth and greater stability. However, FDI is one of the most ambiguous and least understood concepts in international economics. Common debate is confounded by several myths regarding its nature and impact. It is often portrayed as a stable, cross-border flow of capital that adds to productive capacity and meets foreign exchange shortfalls. However, the reality is far more complex. FDI does not always involve inflows of financial or real capital. Greenfield investment, unlike mergers and acquisitions, makes a direct contribution to productive capacity, but can crowd out domestic investors. FDI can induce significant instability in currency and financial markets. Its immediate contribution to balance-of-payments may be positive, but its longer-term impact is often negative because of high-profit remittances and import contents.

The Future Ain’t What It Used to Be

2018 ◽  
Author(s):  
Ashoka Mody
Keyword(s):  
Financial Markets ◽  
Social Problems ◽  
Financial Integration ◽  
Fiscal Rules ◽  
Fiscal Discipline ◽  
European Project ◽  
The Future ◽  
The Right

This chapter describes two scenarios, the two possible ways in which the final act of the European project plays out. In the first scenario, European authorities remain confident that they have essentially been on the right track and they continue to make modest course corrections, which they believe will ensure a brighter European future. However, the elusive and frustrating pursuit of deeper economic and financial integration causes more economic and political damage. Setbacks and crises recur to test the euro and its accompanying political vision. In the second scenario, the pro-European vision, European authorities recognize the important truth that “more Europe” will not solve Europe's most pressing economic and social problems. They dismantle the economically counterproductive and politically corrosive system of fiscal rules and rely more on financial markets to enforce fiscal discipline. Paradoxically, the euro survives, not because it adds value but because it becomes largely irrelevant.

scholarly journals Are Cross-Border Classes Feasible for Students to Collaborate in the Analysis of Energy Efficiency Strategies for Socioeconomic Development While Keeping CO2 Concentration Controlled?

2021 ◽  
Vol 13 (3) ◽  
pp. 1584
Author(s):  
Roberto Araya ◽  
Pedro Collanqui
Keyword(s):  
Energy Efficiency ◽  
Socioeconomic Development ◽  
Concept Maps ◽  
Research Question ◽  
Co2 Concentration ◽  
Asia Pacific ◽  
School Students ◽  
Improve Energy Efficiency ◽  
Cross Border ◽  
Science Classes

Education is critical for improving energy efficiency and reducing CO2 concentration, but collaboration between countries is also critical. It is a global problem in which we cannot isolate ourselves. Our students must learn to collaborate in seeking solutions together with others from other countries. Thus, the research question of this study is whether interactive cross-border science classes with energy experiments are feasible and can increase awareness of energy efficiency among middle school students. We designed and tested an interactive cross-border class between Chilean and Peruvian eighth-grade classes. The classes were synchronously connected and all students did experiments and answered open-ended questions on an online platform. Some of the questions were designed to check conceptual understanding whereas others asked for suggestions of how to develop their economies while keeping CO2 air concentration at acceptable levels. In real time, the teacher reviewed the students’ written answers and the concept maps that were automatically generated based on their responses. Students peer-reviewed their classmates’ suggestions. This is part of an Asia-Pacific Economic Cooperation (APEC) Science Technology Engineering Mathematics (STEM) education project on energy efficiency using APEC databases. We found high levels of student engagement, where students discussed not only the cross-cutting nature of energy, but also its relation to socioeconomic development and CO2 emissions, and the need to work together to improve energy efficiency. In conclusion, interactive cross-border science classes are a feasible educational alternative, with potential as a scalable public policy strategy for improving awareness of energy efficiency among the population.

scholarly journals The future of financial markets and regulation: what strategy for Europe?

foresight ◽  
2014 ◽  
Vol 16 (2) ◽  
pp. 95-108 ◽  
Author(s):  
Jean-Baptiste Gossé ◽  
Dominique Plihon
Keyword(s):  
Financial Markets ◽  
Capital Market ◽  
Financial Stability ◽  
Design Methodology ◽  
Financial Integration ◽  
Content Type ◽  
Realistic Option ◽  
The Future ◽  
Unstable Environment ◽  
Insight Into

Purpose – This article aims to provide insight into the future of financial markets and regulation in order to define what would be the best strategy for Europe. Design/methodology/approach – First the authors define the potential changes in financial markets and then the tools available for the regulator to tame them. Finally, they build five scenarios according to the main evolutions observed on the financial markets and on the tools used by the regulator to modify these trends. Findings – Among the five scenarios defined, two present highly unstable features since the regulator refuses to choose between financial opening and independently determining how to regulate finance in order to preserve financial stability. Three of them achieve financial stability. However, they are more or less efficient or feasible. In terms of market efficiency, the multi-polar scenario is the best and the fragmentation scenario is the worst, since gains of integration depend on the size of the new capital market. Regarding sovereignty of regulation, fragmentation is the best scenario and the multi-polar scenario is the worst, because it necessitates coordination at the global level which implies moving further away from respective national preferences. However, the more realistic option seems to be the regionalisation scenario: this level of coordination seems much more realistic than the global one; the market should be of sufficient size to enjoy substantial benefits of integration. Nevertheless, the “European government” might gradually increase the degree of financial integration outside Europe in line with the degree of cooperation with the rest of the world. Originality/value – Foresight studies on financial markets and regulation are quite rare. This may be explained by the difficulty to forecast what will be their evolution in the coming decades, not least because finance is fundamentally unstable. This paper provides a framework to consider what could be the best strategy of regulators in such an unstable environment.

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