Country-specific equity market characteristics and foreign equity portfolio allocation

Chandra Thapa, S Poshakwale

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)


Do country-specific equity market characteristics explain variations in foreign equity portfolio allocation? We study this question using comprehensive foreign equity portfolio holdings data and different measures of country-specific equity market factors for 36 host countries. Employing panel data econometric estimations, our investigation shows that foreign investors prefer to invest more in larger and highly visible developed markets which are more liquid, exhibit a higher degree of market efficiency and have lower trading costs. The findings imply that by improving the preconditions necessary for well-functioning capital markets, policymakers should be able to attract higher levels of foreign equity portfolio investments.
Original languageEnglish
Pages (from-to)189-211
Number of pages23
JournalJournal of International Money and Finance
Issue number2
Publication statusPublished - Mar 2012


  • foreign equity portfolio allocations
  • stock market development
  • panel data models
  • stock market


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