Gravity and Culture in Foreign Portfolio Investment

47 Pages Posted: 31 Aug 2011

See all articles by Raj Aggarwal

Raj Aggarwal

Kent State University Foundation; University of Akron; Federal Reserve Bank of Cleveland; Kent State University

Colm Kearney

Monash University - Monash Business School

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Jiangxi University of Finance and Economics; Abu Dhabi University - College of Business Administration; Ho Chi Minh City University of Economics and Finance

Date Written: September 1, 2012

Abstract

Using panel regression estimates from the IMF’s CPIS survey of foreign debt and equity portfolios across 174 originating and 50 destination countries from 2001 to 2007, we clarify the role of culture and extend the set of cultural variables that have been investigated in gravity models of foreign portfolio investment (FPI). Incorporating Hofstede’s cultural dimensions of individualism, masculinity, power distance and uncertainty avoidance, we show how cultural traits in both originating and destination countries, as well as the cultural distances that separate them, interact with geographic distance and other gravity variables to determine global FPI patterns. We find hitherto unreported effects and show that while gravity always deters FPI, aspects of culture and cultural distance can offset this by supporting FPI.

Keywords: FPI, home bias, culture, gravity models

JEL Classification: F21, F23 , F37 , G12, G15

Suggested Citation

Aggarwal, Raj and Aggarwal, Raj and Kearney, Colm and Lucey, Brian M., Gravity and Culture in Foreign Portfolio Investment (September 1, 2012). Available at SSRN: https://ssrn.com/abstract=1014361 or http://dx.doi.org/10.2139/ssrn.1014361

Raj Aggarwal

Kent State University Foundation ( email )

7380 Sherman Rd
Chesterland, OH 44026
United States
440-729-6010 (Phone)

HOME PAGE: http://www.uakron.edu/colleges/cba/facultylist/a/aggarwal.php

University of Akron ( email )

7380 Sherman Rd
Chesterland, OH 44026
United States
440-729-6010 (Phone)

HOME PAGE: http://www.uakron.edu/colleges/cba/facultylist/a/aggarwal.php

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Kent State University ( email )

College of Business Administration
Kent, OH 44242-0001
United States

Colm Kearney

Monash University - Monash Business School ( email )

Sir John Monash Drive
Caulfield
Melbourne, Victoria 3168
Australia
+353399031021 (Phone)

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Abu Dhabi University - College of Business Administration ( email )

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
256
Abstract Views
3,532
Rank
216,342
PlumX Metrics