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The Investment Allocation of Sovereign Wealth Funds
Vidhi Chhaochharia University of Miami Luc Laeven International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR) July 8, 2009 Abstract: Sovereign wealth funds have emerged as an important investor of global equity, attracting growing attention. Despite frequently voiced concerns that sovereign wealth funds serve political objectives, little is known about their investment allocation. We collect new data on close to 30,000 equity investments by sovereign wealth funds and using both a country-level and firm-level analysis find that they tend to invest in countries with common cultural traits. This cultural bias indicates that sovereign wealth funds prefer to invest in the familiar. While other global investors show similar aptitude to investing in the familiar, the cultural bias of sovereign wealth fund investment is particularly pronounced.
Keywords: Sovereign wealth funds, Asset allocation, Culture, Information JEL Classifications: G3 Working Paper SeriesDate posted: September 03, 2008 ; Last revised: July 14, 2009Suggested CitationContact Information
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