Nonlinearities and a Pecking Order in Cross-border Investment

48 Pages Posted: 18 Nov 2021

See all articles by Sara B. Holland

Sara B. Holland

University of Oklahoma - Michael F. Price College of Business

Sergei Sarkissian

McGill University; University of Edinburgh

Michael J. Schill

University of Virginia - Darden School of Business

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 29, 2021

Abstract

Nonlinearities arise in international investment because of a pecking order in barriers. Some severe barriers render all others meaningless and only when they are alleviated do other barriers become important. We show, using quantile regressions designed to model relations at more points than just the conditional mean, how various investment theories hold at different points in the distribution of bilateral cross-border equity holdings. Our results reconcile a number of findings in the literature by highlighting that datasets that focus on different points of the barriers (investment) distribution can naturally lead to different results.

Keywords: Capital flows, Capital controls, International investments, Market integration

JEL Classification: F15, F21, F30, G15

Suggested Citation

Holland, Sara B. and Sarkissian, Sergei and Schill, Michael J. and Warnock, Francis E., Nonlinearities and a Pecking Order in Cross-border Investment (October 29, 2021). Available at SSRN: https://ssrn.com/abstract=3952612 or http://dx.doi.org/10.2139/ssrn.3952612

Sara B. Holland (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

Sergei Sarkissian

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

HOME PAGE: http://sergei-sarkissian.com

University of Edinburgh

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Edinburgh, Scotland EH8 9JS
United Kingdom

Michael J. Schill

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

Francis E. Warnock

University of Virginia - Darden Business School ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-6076 (Phone)

HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138-5398

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