Distance Matters for Portfolio Investment - But What Kind of Distance?

33 Pages Posted: 17 Jan 2016 Last revised: 6 Mar 2016

See all articles by Raj Aggarwal

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland; Kent State University; Kent State University Foundation

Colm Kearney

Monash University - Monash Business School

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Samuel Vigne

Trinity College (Dublin) - Trinity Business School

Date Written: January 16, 2016

Abstract

Using the International Monetary Funds (IMF) Coordinated Portfolio Investment Survey (CPIS) across 174 originating and 50 destination countries, we apply extreme bounds analysis ((Leamer (1983),Granger and Uhlig (1990) & Salai Martin (1997)) within a gravity framework to examine the interactions between geographic, institutional, cultural and psychic distances in shaping bilateral international portfolio positions throughout the world. We find that while psychic distance always matters, the other concepts are fragile in their contribution to explaining global investments. Our approach and findings have implications for many studies in international business, economics, finance and management.

Keywords: distance, foreign portfolio investment, extreme bounds, Gravity Model

JEL Classification: F21, F23 , F37 , G15

Suggested Citation

Aggarwal, Raj and Kearney, Colm and Lucey, Brian M. and Vigne, Samuel, Distance Matters for Portfolio Investment - But What Kind of Distance? (January 16, 2016). Available at SSRN: https://ssrn.com/abstract=2716623 or http://dx.doi.org/10.2139/ssrn.2716623

Raj Aggarwal

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Kent State University ( email )

College of Business Administration
Kent, OH 44242-0001
United States

Kent State University Foundation ( email )

Akron, OH 44325-4803
United States

Colm Kearney

Monash University - Monash Business School ( email )

Sir John Monash Drive
Caulfield
Melbourne, Victoria 3168
Australia
+353399031021 (Phone)

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Samuel Vigne

Trinity College (Dublin) - Trinity Business School ( email )

Aras an Phiarsaigh
College Green
Dublin, Leinster D2
Ireland

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