Cross-border equity portfolio choices and the diversification motive: A fractional regression approach

Using a panel fractional regression model to evaluate the determinants of shares of international investment positions, we find some strong empirical support to the claim that a diversification motive is relevant. It turns out that less synchronized economies attract larger portfolio investment shar...

Full description

Saved in:
Bibliographic Details
Published in:Economics letters 2013-11, Vol.121 (2), p.282-286
Main Authors: Pericoli, F.M., Pierucci, E., Ventura, L.
Format: Article
Language:English
Subjects:
Diversification
Fractional regression models
Portfolio choice
Portfolio investments
Regression analysis
Risk sharing
Shares
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Using a panel fractional regression model to evaluate the determinants of shares of international investment positions, we find some strong empirical support to the claim that a diversification motive is relevant. It turns out that less synchronized economies attract larger portfolio investment shares. The utmost relevance of trade relationships among countries in shaping international investment positions is also confirmed. •The paper models international portfolio investment positions as a choice of (bilateral) portfolio shares.•Fractional regression models are used to model those shares.•Using fractional regression models has important consequences in terms of results, with respect to more traditional models.•A panel dataset was used, which allows controlling for unobserved heterogeneity, via proper (country pair) fixed effects.•Both trade and a proxy for diversification motives are important determinants of portfolio shares.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2013.08.026