Portfolio investment outflow and the complementary role of direct investment

Abdullah Noman, Mohammad Nakibur Rahman and Atsuyuki Naka

Journal of Financial Economic Policy, 2015, vol. 7, issue 3, 190-206

Abstract: Purpose - – This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow, namely, foreign direct investment (FDI). Design/methodology/approach - – The relationship between FPI and FDI are modeled using simultaneous equations approach to take potential endogeneity in to account. In a panel of 45 countries over the period of 2001-2009, FPI and FDI are found to be strategically complimentary to each other. Findings - – The two-stage least square estimates suggest existence of both statistically and economically significant relationship between these two types of outflows. In particular, the FDI outflow has empirically significant predictive power in explaining the FPI outflow. Similarly, the FPI outflow also has significant explanatory power for the observed level of FDI outflow. Second, the FPI has greater explanatory power for FDI outflow than the FDI for the FPI outflow. Originality/value - – The authors believe that the paper would contribute to the relevant literature in terms of its originality and scope. The empirical findings of the paper have valuable policy implications.

Keywords: Investment; Endogeneity; International finance; Foreign direct investment; Home bias; Foreign portfolio investment; Simultaneous equations; F21; F30; F32 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:v:7:y:2015:i:3:p:190-206

DOI: 10.1108/JFEP-03-2014-0024

Access Statistics for this article

Journal of Financial Economic Policy is currently edited by Prof Franklin Mixon

More articles in Journal of Financial Economic Policy from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().