Do international portfolio investors follow firms’ foreign investment decisions?

Arbeitspapier

We analyze the interlinkages between foreign direct investment (FDI) and foreign portfolio investment (FPI) between Germany and the major economies. First, we show that Tobin’s q helps explaining the variation of the growth rate of the stock of FDI. Second, we show that foreign and the home stock market returns explain the ariation of the growth rate of the stock of FPI. Most importantly, we find that information about foreign fundamentals is revealed via direct investment. In other words, FDI transactions measured by fitted growth rates of the stock of FDI help explaining current growth rates of the stock of FPI. To our knowledge this observation is the first unambiguous evidence that international portfolio investors follow firms’ expected foreign investment decisions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 815

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business ; Portfolio Choice; Investment Decisions ; International Financial Markets
• Subject: and Information Spillovers ; Foreign Direct Investment ; Foreign Portfolio Investment ; Investor Heterogeneity ; Tobin’s q ; Auslandsinvestition ; Portfolio-Investition ; Tobins Q ; Deutschland ; Industrieländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Santis, Roberto A. ; Ehling, Paul
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/153249
• Last update: 10.03.2025, 11:43 AM CET