The International Equity Holdings of Euro Area Investors
30 Pages Posted: 7 Aug 2006
Date Written: December 2005
We provide a systematic analysis of bilateral, source and host factors driving portfolio equity investment by euro-area countries, using newly-released data on international equity holdings at the end of 2001. We find that bilateral equity holdings are strongly linked to bilateral trade in goods and services and are also associated with proxies for informational proximity. We further document that there exists a significant "euro-area bias," with euro-area countries investing in other euro-area countries over and above the amount predicted by underlying fundamentals.
Keywords: International portfolio equity investment, international trade, gravity
JEL Classification: F21, F34
Suggested Citation: Suggested Citation