Macroeconomic Factors and Foreign Portfolio Investment Volatility: A Case of South Asian Countries

Future Business Journal, Volume 1, Issues 1–2, Pages 65–74, December 2015

10 Pages Posted: 26 May 2017

Date Written: November 30, 2015

Abstract

Macroeconomic factors play a pivotal role in attracting foreign investment in the country. This study investigates the relationship between macroeconomic factors and foreign portfolio investment volatility in South Asian countries. The monthly data is collected for the period ranging from 2000 to 2012 for four Asian countries i.e. China, India, Pakistan and Sri Lanka because monthly data is ideal for measuring portfolio investment volatility. For measuring volatility in foreign portfolio investment, GARCH (1,1) is used because shocks are responded quickly by this model. The results reveal that there exists significant relationship between macroeconomic factors and foreign portfolio investment volatility. Thus, less volatility in international portfolio flows is associated with high interest rate, currency depreciation, foreign direct investment, lower inflation, and higher GDP growth rate of the host country. Thus findings of this study suggest that foreign portfolio investors focus on stable macroeconomic environment of country.

Keywords: Macro Economic Factors, Foreign Direct Investment, Foreign Portfolio Investment, GARCH Model

JEL Classification: G11, G14, G15, G18

Suggested Citation

Waqas, Yahya and Hashmi, Shujahat Haider and Nazir, Muhammad, Macroeconomic Factors and Foreign Portfolio Investment Volatility: A Case of South Asian Countries (November 30, 2015). Future Business Journal, Volume 1, Issues 1–2, Pages 65–74, December 2015, Available at SSRN: https://ssrn.com/abstract=2743133

Yahya Waqas

CUST ( email )

Kahuta Road, Express Highway, Zone V
Islamabad, Federal 44000
Pakistan

HOME PAGE: http://www.cust.edu.pk

Shujahat Haider Hashmi (Contact Author)

HUST ( email )

School of Economics
Wuhan, Hubei
China

Muhammad Nazir

Mohammad Ali Jinnah University (MAJU) ( email )

74 E
Blue Area, Jinnah Avenue
Islamabad, Punjab 46000
Pakistan

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

Paper statistics

Downloads
166
Abstract Views
1,091
Rank
322,602
PlumX Metrics