The Determinants of International Equity Holdings: Information Versus Culture

59 Pages Posted: 16 May 2011 Last revised: 16 Jan 2020

Date Written: March 1, 2011

Abstract

I examine whether the effect of physical distance on the geography of international portfolio investments undergoes an informational or a cultural channel. Using two measures to disentangle the effects of the physical distance, namely the cultural distance proposed by Kogut and Singh (1988), and a new measure of the information distance, I analyze a panel dataset showing 24 source countries’ bilateral equity holdings in various destinations as of the end-2006. Regressions suggest that the effect of the geography on international portfolio investments is likely to be a phenomenon linked to information asymmetries rather than one reflecting the impact of the cultural proximity between countries.

Keywords: information distance, cultural distance, gravity model, home bias

JEL Classification: F36, G14, G15

Suggested Citation

Diyarbakirlioglu, Erkin, The Determinants of International Equity Holdings: Information Versus Culture (March 1, 2011). International Conference of the French Finance Association (AFFI), May 11-13, 2011. Available at SSRN: https://ssrn.com/abstract=1833419 or http://dx.doi.org/10.2139/ssrn.1833419

Erkin Diyarbakirlioglu (Contact Author)

IAE Gustave Eiffel ( email )

Place de la Porte des Champs
Créteil, 94010
France

HOME PAGE: http://www.iae-eiffel.fr/

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