Anil V. Mishra

International investment patterns: Evidence using a new dataset

Abstract This paper examines the bilateral, source and host factors driving portfolio equity investment across a set of countries using International Monetary Funds new dataset on international equity holdings at the end of 1997, 2001 and 2002. The paper finds that the bilateral equity investment is strongly correlated with the underlying patterns of trade in goods and services. The information asymmetries and cultural-institutional proximity are important for bilateral equity investment. The size of domestic stock market is the key correlate of aggregate foreign portfolio equity asset and liability holdings. The scale of aggregate foreign equity asset holdings is larger for countries having high income per capita.

AUSTRALIA'S EQUITY HOME BIAS

This paper constructs the float adjusted measure of home bias and explores the determinants of Australias equity home bias by employing the International Monetary Funds high quality dataset (2001 to 2005) on cross border equity investment. On the empirical front, the paper conducts robustness tests by employing instrumental variables that are standard in the financial economics literature. The paper finds that the share of the number of firms listed in the domestic market and the share of internet users in the total population of the host country has a significant impact on equity home bias. Trade linkages are found to have a mixed impact on equity home bias. The paper also finds that the countrys market share of the world market capitalisation and transaction costs do not impact Australias equity home bias. Investors are found to exhibit low diversification motives.

Where do Australians Invest

In this article, we analyse the geography of Australias international portfolio investment using the International Monetary Funds Co-ordinated Portfolio Investment Survey dataset. Preliminary results suggest that Australias external holdings of equity and debt as a percentage of national income almost doubled between 1997 and 2001. However, Australias international investment position as a percentage of national income is one of the lowest amongst the major OECD countries. In 2001 approximately two-thirds of Australias total investments were in the United States and the United Kingdom. By contrast Australias trade share (exports plus imports as a percentage of Australias total world trade) with these countries was approximately 20 per cent in the same year. The major determinants of Australias geographical allocation of portfolio investment indicate a broad correspondence between stock market capitalisation of destination countries and the allocation of Australian financial investments but with some deviations from that baseline, where the deviations are correlated with Australian trade patterns. Copyright 2006 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.

Determinants of FDI inflows to Arab economies

The paper studies location determinants of foreign direct investment (FDI) to 16 Arab economies over the period from 1984 to 2012, by employing Arellano–Bover/Blundell–Bond linear dynamic panel data estimation. We find that market size, trade openness, preferential trade agreements and financial development have significant positive impact on FDI inflows to Arab economies. FDI in Arab economies appears to be resource seeking since the total oil supply variable is positive and significant. The paper finds that better institutions and educated labour force may play a key role in attracting FDI inflows. We suggest that Arab economies should sequence their economic policy measures with the institutional ones, beginning with a focus on privatization and trade liberalization, and subsequently shift to improvement in economic growth.

Measures of Equity Home Bias Puzzle

The paper develops measures of home bias for 48 countries over the period 2001 to 2011 by employing various models: International Capital Asset Pricing Model (ICAPM), Mean-Variance, Minimum-Variance, Bayes-Stein, Bayesian and Multi-Prior. ICAPM country portfolio weights are computed relative to world market capitalization. Bayesian models allow for various degrees of mis-trust in the ICAPM model. Multi-Prior restricts the expected return for each asset to lie within specified confidence interval around its estimated value. Mean-Variance computes optimal weights by sample estimates of mean and covariance matrix of sample return. Bayes-Stein shrinks each asset’s historical mean return toward the return of the Minimum Variance Portfolio and improves precision associated with estimating the expected return of each asset. The paper finds that foreign listing, idiosyncratic risk, beta, inflation, natural resources rents, size, global financial crisis and institutional quality has significant impact on home bias. There are policy implications associated with home bias.

Corporation Diversification and Firm Performance: Evidence from Vietnamese Listed Firms

We examine the effect of corporate diversification on the performance of firms listed on the Vietnamese stock exchanges, using 2744 firm year observations over the period from 2007 to 2012. We find that corporate diversification has a negative impact on firm performance. Our results are robust to various econometric estimation techniques including fixed effect, instrumental fixed effect, Heckman selection model and system generalised method of moments. In the Vietnamese context, the lack of an efficient corporate governance system may encourage firms to follow corporate diversification strategies, thus impairing their performance.

Determinants of International Financial Integration of GCC Markets

This study examines the determinants of international financial integration of the Gulf Cooperation Council (GCC) markets with the rest of the world by constructing several quantity-based measures of financial integration. The results provide strong evidence that Trade Openness; financial openness and Domestic Credit have positive and significant impact on GCC markets’ measures of international financial integration. We find a negative change in financial integration measures due to Trade Openness and Domestic Credit depending on global financial crisis. The future path for international financial integration in GCC depends on the deepening of domestic financial systems, overall economic development, as well as the pace of trade integration.

Mena Stock Markets Integration: Pre and Post Global Financial Crisis: MENA INTEGRATION: GLOBAL FINANCIAL CRISIS

This paper examines the short†and long†run linkages in pre and post global financial crisis among Middle East and North Africa (MENA) stock markets, between MENA and Chinese stock markets and also between MENA and developed (United States and United Kingdom) stock markets. Results indicate that both long†run co†integration relationships and short†run causal linkages among MENA stock markets increased in post†crisis than that in pre†crisis sub†period. The degree of integration between MENA and Chinese stock markets increased in post†crisis than pre†crisis. We also find that the degree of integration between MENA and developed (United States and United Kingdom) stock markets increased in post†crisis than that in pre†crisis. The presence of increased linkages among MENA markets, and between MENA and Chinese stock markets and also between MENA and developed (United States and United Kingdom) markets has important implications for portfolio investors and policy makers.