European portfolio investment outflows: the impact of the European Monetary Union

Fernando Seabra () and Tatiana Santos ()
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Fernando Seabra: Universidade Federal de Santa Catarina

Brazilian Review of Finance, 2010, vol. 8, issue 4, 377-382

Abstract: The objective of this paper is to analyse the main determinants of bilateral foreign portfolio investment (FPI) from European countries to host countries, including European Union countries, other developed countries and emerging markets. An FPI model based on an extended gravity equation is estimated from a panel data set over the period 2001-2006. Among the explanatory variables are interest rate differentials, the expected exchange rate uncertainty – estimated by an autoregressive conditional heteroskedasticity (ARCH) model – a dummy variable for the European Monetary Union (EMU) and gravity variables. The results give support for the asymmetric information hypothesis since the EMU variable and geographical and institutional distances are estimated to be significant, indicating a regional “home bias” effect for European portfolio holdings.

Keywords: foreign portfolio investment; European Monetary Union; gravity model. (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:8:y:2010:i:4:p:377-382

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