Showing papers on "Foreign portfolio investment published in 2009"

Fire-Sale FDI

Abstract: Financial crises are often accompanied by an outflow of foreign portfolio investment and an inflow of foreign direct investment (FDI). We provide an agency-theoretic framework that explains this phenomenon. During crises, agency problems affecting domestic firms are exacerbated, and, in turn, external financing constrained. Transfer of control in the form of direct ownership of failed firms' assets by alternate users can circumvent agency problems, but during crises, efficient owners (e.g. other domestic firms) face similar financing constraints. The result is a transfer of ownership to foreign firms, including inefficient ones, at fire-sale prices. Such fire-sale FDI is associated with a flipping of acquired firms back to domestic owners once the crisis abates. These features of fire-sale FDI find empirical support.

Stock market development and private investment growth in nigeria

Abstract: This paper is primarily designed to examine the nature of the relationship existing between stock market development and the level of investment flows in a country with a high degree of macroeconomic instability; and whether the stock market plays a uniform role in attracting both domestic and foreign investments in such economic situation. Extrpoloted macroeconomic quarterly data (over a period from 1970 to 2006) are used in the analysis. The Johansen Cointegration model is adopted to examine the long-run trends in the variables. While controlling for other variables, a vector error correction model (VERCM) is used in estimating the relationship between investment growth, on one hand, and stock market development on the other. The study shows that development in the Nigerian stock market over the years was able to spur growth in domestic private investment flows, but unable to do so in the case of foreign private investment; and that development in the country’s banking system rather had some distabilising effects on the flow of private investments. The researchers attributed this to persistent cases of distress and failure in the banking system. This study is among the few of its kind to have empirically sort for and established some discriminant effects of stock market development in the flow of domestic and foreign private investments, at least from the point of view of a constrained market economy.

The Efficiency of Sponsor and Participant Portfolio Choices in 401(K) Plans

Abstract: Portfolio performance in 401(k) plans depends on both the investment menu made available by plan sponsors and participants portfolio decisions. We use a unique dataset of nearly 1 million participants in one thousand pension plans to identify key portfolio inefficiencies in 401(k) plans, attributing them either to the sponsor’s menu design or to participants’ own portfolio choices. We show that most sponsors offer efficient investment menus. However, many participants fail to construct efficient portfolios, leading to retirement wealth that could be one-fifth lower due to poor portfolio decisions. Because participants are the main source of inefficient DC portfolio choices, strategies targeting their portfolio choices, such as improved default investment strategies or advice programs, may help. Also, in sponsors’ design of 401(k) menus, the number of options offered is less important than the range of funds provided.

Information Immobility and Foreign Portfolio Investment

Abstract: We examine how residents of the United States allocate their stock portfolios internationally. We find that a large U.S. Foreign Direct Investment (FDI) position in a destination country in 1990 is associated with a relatively large stock portfolio position in that country in the 2001-2006 period. Moreover, a change in the U.S. FDI position from 1980 to 1990 helps predict the change in the U.S. FPI position from 1994 to 2006. These results are rationalized by Van Nieuwerburgh and Veldkamp's (2009) equilibrium model of learning and portfolio choice under an information processing constraint. FDI establishes marginal differences in the endowments of information about different countries, which later translate into differences in stock portfolio holdings. We control for cross-country differences in capital controls, proximity along different dimensions, corporate governance, and economic and capital market development. Our results also hold for the G6 countries collectively.

Foreign Direct Investment, Productivity, and Country Growth: An Overview

Abstract: The authors review the empirical literature that studies the relationship between foreign direct investment, productivity, and growth using aggregate data and focus on two questions: Is there evidence of a positive relationship between foreign direct investment and national growth? And does the output of the "multinational sectors" exhibit higher labor productivity? The authors also briefly discuss how the microeconomic evidence and a number of aggregation and composition problems might help explain the ambiguous results in this literature.

The Expropriation of Environmental Governance: Protecting Foreign Investors at the Expense of Public Policy

Abstract: Introduction 1. Concepts and methods 2. Foreign investment and the environment 3. The institution of investment protection 4. International investment agreements 5. Foreign investment contracts 6. International investment arbitration 7. Investor-state disputes 8. The threat of arbitration 9. Conclusions.

The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble

Abstract: Introduction 1. London's first stock market boom 2. The rise of the public funds 3. The contemporary debate 4. The development of a financial press 5. Networks of information 6. The investors 7. Stock-jobbing the market 8. Investment strategies Conclusion Appendices Bibliography.

Do public investment and FDI crowd in or crowd out private domestic investment in Malaysia

Abstract: Motivated by the concern of a persistent decline in total investment in Malaysia during the post-crisis era, this article examines the long-run relationship between private domestic investment (PDI), public investment and foreign direct investment (FDI) in Malaysia. Using multivariate cointegration techniques, the results indicate a fairly robust cointegrated relationship between these variables during the period 1960 to 2003. Both public investment and FDI are found to be complementary to, rather than competing with, PDI.

International Diversification with Factor Funds

Abstract: We propose a new investment strategy employing “factor funds” to systematically enhance the mean-variance efficiency of international diversification. Our approach is motivated by the increasing evidence that size (SMB), book-to-market (HML), and momentum (MOM) factors, along with the market factor, adequately describe international stock returns, and by the direct link between investors’ portfolio choice problems and international asset pricing theories and tests. Using data from ten developed countries during the period 1981-2008, we show that the “augmented” optimal portfolio involving local factor funds substantially outperforms the “benchmark” optimal portfolio comprising country market indices only as measured by their portfolio Sharpe ratios. This strongly rejects the intersection hypothesis which posits that the local factor funds do not span investment opportunities beyond what country market indices do. Among the three classes of factor funds, HML funds contribute most to the efficiency gains. In addition, the local version of factor funds outperforms the global factor funds. The added gains from local factor diversification are significant for both in- and out-of-sample periods, and for a realistic range of additional investment costs for factor funds, and remain robust over time.

Foreign Portfolio Investment and Economic Growth in Malaysia

Abstract: This study examines the relationship between foreign portfolio investment (FPI) and Malaysia’s economic performance. In particular, the study analyses the relationship between FPI and real gross domestic product (GDP) using the widely adopted Granger causality test and the more recent Toda and Yamamoto’s (1995) non-causality test to establish the direction of causation between the two variables. Similar method is also applied on the relationship between volatility of FPI and real GDP. Additionally, the study uses an innovation accounting by simulating variance decompositions and impulse response functions for further inferences. Using quarterly data covering the period from 1991 to 2006, the study finds evidence that economic growth causes changes in the FPI and its volatility and not vice versa.. The findings suggest that economic performance is the major pull factor in attracting FPI into the country. Thus, it must be ensured that the Malaysian economy remains on a healthy and sustainable growth path so as to maintain investor confidence in the economy.

Foreign Bank Entry and Credit Allocation in Emerging Markets

Abstract: We employ a unique data set containing bank-specific information to explore how foreign bank entry determines credit allocation in emerging markets. We investigate the impact of the mode of foreign entry (greenfield or takeover) on banks’ portfolio allocation to borrowers with different degrees of informational transparency, as well as by maturities and currencies. The impact of foreign entry on credit allocation may stem from the superior performance of foreign entrants (“performance hypothesis”), or reflect borrower informational capture (“portfolio composition hypothesis”). Our results are broadly in line with the portfolio composition hypothesis, showing that borrower informational capture determines bank credit allocation.

Dividend Taxes and International Portfolio Choice

Abstract: This paper investigates how dividend taxes influence portfolio choices, using the response to the distinctive treatment of a subset of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. An open-economy after-tax capital asset pricing model is used to derive the hypothesis that JGTRRA should lead to a portfolio reallocation by US investors towards equities in tax-favored countries. A difference-in-difference analysis that compares US equity holdings in affected and unaffected countries finds a substantial portfolio reallocation towards the former. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment, changed tax evasion behavior, or changes in stock prices associated (or contemporaneous) with JGTRRA.

The Free Movement of Capital and Foreign Direct Investment

Abstract: The scope of protection offered to foreign investors by EU law has become a matter of intense political debate. Neo-protectionist policies are on the rise within EU Member States, who are struggling to acclimatise to increasing inward direct investment from developing countries. Strict regulations are being implemented to control the flow of this investment, undermining the principle of free movement of capital. Are such policies permitted under EU law? What impact does EU law have on foreign direct investment? This book addresses these questions through a coherent doctrinal reconstruction of the EC Treaty provisions on free movement of capital in a third country context. Opening with a timely restatement of the central features of the EU law of free movement of capital, the book then asks the central question: What rights does a private market participant, engaged in cross-border direct investment originating from or directed to a non-EU Member State, enjoy by virtue of the EC Treaty? The book argues that in principle, the provisions on free movement of capital apply the same liberal standards irrespective of whether intra Community or third country direct investment is involved. Hence, those who participate in third country direct investment enjoy essentially the same guarantees by virtue of the provisions on free movement of capital as those active in intra Community direct investment. Having established the legal doctrine, the book then examines the limits on restrictions to free movement, including financial regulation and discriminatory tax regimes.

Foreign Direct Investment, China and the World Economy

Abstract: Foreword Professor Klaus Macharzina Introduction SECTION I: THEORY Regaining the Edge for International Business Research co-author DLessard Stephen Hymer: Three phases, One Approach Firm Configuration and Internationalization: A Model co-author NHashai Edith Penrose's Theory of the Growth of the Firm and the Strategic Management of Multinational Enterprises co-author MCasson SECTION II: CHINESE OUTWARD FOREIGN DIRECT INVESTMENT The Determinants of Chinese Outward Foreign Direct Investment co-author JClegg, ACross, PZheng, HVoss & XLiu Historic and Emergent Trends in Chinese Outward Direct Investment co-authors ARCross, Han, HVoss & XLiu SECTION III: FOREIGN DIRECT INVESTMENT IN CHINA Cultural Awareness in Knowledge Transfer to China: The Role of Guanxi and Mianzi co-Authors JClegg & HTan Is the Relationship Between Inward FDI and Spillover Effects Linear? An Empirical Examination of the Case of China co-authors JClegg & CWang Inward FDI and Host Country Productivity: Evidence from China's Electronics Industry co-authors JClegg & CWang China's Inward Foreign Direct Investment Success: Southeast Asia in the Shadow of the Dragon co-authors JClegg, ACross & HTan The Impact of Foreign Direct Investment on Chinese Export Performance co-authors CWang, PJBuckley, JClegg & MKafouros The Impact of Foreign Direct Investment on the Productivity of China's Automotive Industry co-authors JClegg, PASiler, GGiorgioni & PZheng The Impact of Foreign Ownership, Local Ownership and Industry Characteristics on Spillover Benefits from Foreign Direct Investment in China co-authors JClegg & CWang Organization and Action in a Chinese State-Owned Service Intermediary: the Case of Sinotrans co-authors JClegg & HTan SECTION IV: FOREIGN DIRECT INVESTMENT AND POLICY Foreign Direct Investment in Ireland: Policy Implications for Emerging Economies co-author FRuane A Simple and Flexible Dynamic Approach to Foreign Direct Investment Growth: The Canada - United States Relationship in the Context of Free Trade co-authors JClegg, NForsans & KReilly

Dynamic Effects of Changes in Interest Rates and Exchange Rates on the Stock Market Return in Bangladesh

Abstract: Investigation of the exchange rate reveals a short term net negative feedback from the exchange rate to stock market with insignificant associated T-values of the coefficients of the contemporaneous and lagged variables. It shows that the exchange rate and stock market are nearly independent, which is also evidenced by the R2 and F statistics. This is because foreign portfolio investment is very limited in Bangladeshi stock markets, particularly after 1996, which results in little impact of changes in foreign exchange rates on stock market returns in Bangladesh.

Institutional Investment Management: Equity and Bond Portfolio Strategies and Applications

Abstract: Preface. Acknowledgments. About the Author. CHAPTER 1 Overview of Investment Management. Setting Investment Objectives. Establishing an Investment Policy. Selecting a Portfolio Strategy. Constructing and Monitoring the Portfolio. Measuring and Evaluating Performance. References. PART ONE Portfolio Theory and Asset Pricing. CHAPTER 2 Theory of Portfolio Selection. Some Basic Concepts. Measuring a Portfolio's Expected Return. Measuring Portfolio Risk. Portfolio Diversification. Choosing a Portfolio of Risky Assets. Index Model's Approximations to the Covariance Structure. Summary. References. CHAPTER 3 Applying Mean-Variance Analysis. Using Historical Data to Estimate Inputs. Application of Portfolio Theory to Asset Allocation. Implementing the Optimal Portfolio. Summary. References. CHAPTER 4 Issues in the Theory of Portfolio Selection. Quick Review of Probability Theory. Limitations of the Variance as a Risk Measure. Desirable Features of Investment Risk Measures. Alternative Risk Measures for Portfolio Selection. Extensions of the Theory of Portfolio Selection. Behavioral Finance Attack on the Theory of Portfolio. Summary. References. CHAPTER 5 Asset Pricing Theories. Characteristics of an Asset Pricing Model. Capital Asset Pricing Model. Arbitrage Pricing Theory Model. Some Principles to Take Away. Summary. Appendix. References. PART TWO Common Stock Analysis and Portfolio Management. CHAPTER 6 The U.S. Equity Markets. Exchange Market Structures. The U.S. Stock Markets: Exchanges and OTC Markets. Off-Exchange Markets and Alternative Electronic Markets. Evolving Stock Market Practices. Basic Functioning of Stock Markets. Summary. References. CHAPTER 7 Common Stock Strategies and Performance Evaluation. Market Efficiency. Stock Market Indicators. Top-Down vs. Bottom-Up Approaches. Fundamental vs. Technical Analysis. Strategies Based on Technical Analysis. Strategies Based on Fundamental Analysis. Equity Style Investing. Passive Strategies. Measuring and Evaluating Performance. Summary. References. CHAPTER 8 Financial Analysis. Financial Ratio Analysis. Cash Flow Analysis. Usefulness of Cash Flows in Financial Analysis. Summary. References. CHAPTER 9 Applied Equity Valuation. Discounted Cash Flow Models. Relative Valuation Methods. DCF vs. RV Methods. Summary. References. CHAPTER 10 Forecasting Stock Returns. The Concept of Predictability. A Closer Look at Pricing Models. Predictive Return Models. Is Forecasting Markets Worth the Effort? Summary. References. CHAPTER 11 Managing a Common Stock Portfolio with Fundamental Factor Models. Tracking Error. Fundamental Factor Model Description and Estimation. Risk Decomposition. Applications in Portfolio Construction and Risk Control. Summary. References. CHAPTER 12 Transaction Costs and Trade Execution in Common Stock Portfolio Management. Trading Mechanics. Trading Arrangements for Institutional Investors. A Taxonomy of Transaction Costs. Liquidity and Transaction Costs. Market Impact Measurements and Empirical Findings. Forecasting and Modeling Market Impact. Incorporating Transaction Costs in Asset-Allocation Models. Optimal Trading. Integrated Portfolio Management Beyond Expected Return and Portfolio Risk. Summary. References. CHAPTER 13 Using Stock Index Futures and Equity Swaps in Equity Portfolio Management. Derivatives Process. Basic Features of Futures Contracts. Basic Features of Stock Index Futures. Applications for Stock Index Futures. Equity Swaps. Summary. References. CHAPTER 14 Using Equity Options in Investment Management. Basic Features of Options. Basic Features of Listed Equity Options. Risk and Return Characteristics of Listed Options. The Option Price. Use of Listed Equity Options in Portfolio Management. OTC Equity Options: The Basics. Use of Exotic Equity Options. Summary. References. CHAPTER 15 Equity Option Pricing Models. Put-Call Parity Relationship. Option Pricing Models. Sensitivity of the Option Price to a Change in Factors. Estimating Expected Stock Return Volatility. Summary. References PART THREE Bond Analysis and Portfolio Management. CHAPTER 16 Bond Fundamentals and Risks. Features of Bonds. Risks Associated with Investing in Bonds. Summary. Appendix: Calculating Accrued Interest. References. CHAPTER 17 Treasury and Agency Securities, Corporate Bonds, and Municipal Bonds. Treasury Securities. Federal Agency Securities. Corporate Bonds. Municipal Bonds. Non-U.S. Bonds. Summary. References. CHAPTER 18 Structured Products: RMBS, CMBS, and ABS. Agency Residential Mortgage-Backed Securities. Private-Label Residential MBS. Mortgage-Related, Asset-Backed Securities: Subprime MBS. Commercial Mortgage-Backed Securities. Nonmortgage Asset-Backed Securities. Summary. References. CHAPTER 19 The Structure of Interest Rates. The Base Interest Rate. The Risk Premium Between Non-Treasury and Treasury Securities with the Same Maturity. Factors Affecting the Risk Premium. Term Structure of Interest Rates. Summary. References. CHAPTER 20 Bond Pricing and Yield Measures. Pricing of Option-Free Bonds. Conventional Yield Measures. Portfolio Yield Measures. Total Return. Summary. CHAPTER 21 Bond Price Volatility and the Measurement of Interest Rate Risk. Price Volatility Properties of Option-Free Bonds. Factors that Affect a Bond's Price Volatility. Measuring Interest Rate Risk Using the Price Value of a Basis Point. Measuring Interest Rate Risk Using Duration and Convexity. Measuring Exposure to Yield Curve Changes Key Rate Duration. Summary. References. CHAPTER 22 Valuing Bonds with Embedded Options. The Interest Rate Lattice. Calibrating the Lattice. Using the Lattice for Valuation. Using the Lattice Model to Value Bonds with Embedded Options. Extensions. Summary. References. CHAPTER 23 Bond Portfolio Strategies. Bond Market Indexes. The Spectrum of Strategies. Value-Added Strategies. Using Factor Models to Manage a Portfolio. Liability-Driven Strategies. Summary. References. CHAPTER 24 Using Derivatives in Bond Portfolio Management. Using Treasury Bond and Note Futures Contracts in Bond Portfolio Management. Use of Interest Rate Options in Bond Portfolio Management. Using Interest Rate Swaps in Bond Portfolio Management. Using Stock Index Futures and Treasury Bond Futures to Implement an Asset Allocation Decision. Using Credit Default Swaps to Manage Credit Risk. Summary. References. PART FOUR Investment Companies, Exchange-Traded Funds, and Alternative Investments. CHAPTER 25 Investment Companies, Exchange-Traded Funds, and Investment-Oriented Life Insurance. Investment Companies. Exchange-Traded Funds. Investment-Oriented Life Insurance. Summary. References. CHAPTER 26 Alternative Assets. Hedge Funds. Private Equity. Commodity Investments. Summary. References. APPENDIX. Measuring and Forecasting Yield Volatility. Calculating the Standard Deviation from Historical Data. Modeling and Forecasting Yield Volatility. Summary. References. Index.

Foreign Direct Investment and Evaluation of Country Risk: an Empirical Investigation

Abstract: This paper investigates the extent to which country risk ratings influence the inflow of foreign direct investment (FDI). Using International Monetary Fund (IMF) data from over 100 countries and Euromoney’s country risk ratings over a ten‐year period, this study finds that country risk ratings have a significant influence on FDI. This effect is stronger for US FDI. We also analyze the relative importance of the individual components of the country risk index.

Do Stock Markets Matter in Investment Growth in Africa

Abstract: The paper investigates the effect of stock market prices on investment growth using dynamic panel data analysis of selected African countries. In line with theoretical expectations investment responds positively to increases in stock prices. Further analysis based on interaction terms reveals that the sensitivity of investment to stock prices increases with stock market development. The paper also finds that even without the inclusion of the most sophisticated market-South Africa, the positive relationship between investment and stock market prices continues to exist in the smaller markets. The findings underscore the importance of stock markets to investment formation in Africa.

Entry Modes and the Determinants of Foreign Direct Investment in a European Union Accession Country: The Case of Albania

Abstract: The countries of South-Eastern Europe have begun attracting the interest of foreign investors as stability has begun to return to the region. For the purpose of this study, valuable information was collected regarding the determination of foreign direct investment (FDI) in Albania during the transition period 1989–2004. Its purpose was to identify the entry modes and the kind and type of motives and entry barriers for inward FDI that foreign firms have considered entering the country. This research has identified a variety of internal business conditions/factors (obstacles– motives/incentives) that have been examined by foreign enterprises. The study is part of a broader research agenda in the region based on previous FDI theories and follows Dunning's theory regarding the possible motives and entry barriers for foreign direct investment. A total of 51 foreign companies participated in this research representing the bulk of current, major FDIs into the country, providing a strong foundation upon which to ...

How trade and foreign investment affect the growth of a small but not so open economy: Australia?

Abstract: This article analyses the impact of trade and foreign investment on a small but not so open economy, Australia, whose growth rate outpaced the majority of the OECD countries in the last decade. We model five channels of outward orientation: exports, imports, foreign direct investment, foreign portfolio investment and other foreign investment. A cointegrated vector autoregressive model, complemented by a robust Granger noncausality test, is specified to identify permanent channels of outward orientation. Imports and direct investment are found to have a growth effect in the long run. The effect of imports is almost three times that of direct investment.