Abstract

http://ssrn.com/abstract=1434276
 
 

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Why Don't Asians Invest in Asia? The Determinants of Cross-Border Portfolio Holdings


Alicia García-Herrero


BBVA Hong Kong Branch - International Finance Centre

Philip D. Wooldridge


Bank for International Settlements (BIS)

Doo Yong Yang


Asian Development Bank Institute

April 9, 2009

Asian Economics Papers, Vol. 8
BBVA Working Paper No. 0906

Abstract:     
This paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyse empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies; emerging market economies; European economies; and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region.

Number of Pages in PDF File: 23

Keywords: cross-border portfolio investment, regional financial integration, gravity model

JEL Classification: F21, F36, G11

Accepted Paper Series


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Date posted: July 15, 2009 ; Last revised: March 22, 2010

Suggested Citation

García-Herrero, Alicia and Wooldridge, Philip D. and Yang, Doo Yong, Why Don't Asians Invest in Asia? The Determinants of Cross-Border Portfolio Holdings (April 9, 2009). Asian Economics Papers, Vol. 8; BBVA Working Paper No. 0906. Available at SSRN: http://ssrn.com/abstract=1434276

Contact Information

Alicia Garcia-Herrero (Contact Author)
BBVA Hong Kong Branch - International Finance Centre ( email )
43/F., Tower Two, International Finance Centre
8 Finance Street, Central
Hong Kong
Hong Kong
852-25823289 (Phone)
Philip D. Wooldridge
Bank for International Settlements (BIS) ( email )
CH-4002 Basel, Basel-Stadt
Switzerland
Doo Yong Yang
Asian Development Bank Institute ( email )
Kasumigaseki Building 8F 3-2-5
Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

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