International Portfolio Investment: Theory, Evidence, and Institutional Framework

At first sight, the idea of investing internationally seems exciting and full of promise because of the many benefits of international portfolio investment. By investing in foreign securities, investors can participate in the growth of other countries, hedge their consumption basket against exchange...

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Bibliographic Details
Published in:Financial markets, institutions & instruments institutions & instruments, 2001-08, Vol.10 (3), p.85-155
Main Authors: Bartram, Söhnke M., Dufey, Gunter
Format: Article
Language:English
Subjects:
Foreign exchange rate risk
International finance
Manycompanies
Portfolio investments
Securities markets
Statistical data
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Summary:At first sight, the idea of investing internationally seems exciting and full of promise because of the many benefits of international portfolio investment. By investing in foreign securities, investors can participate in the growth of other countries, hedge their consumption basket against exchange rate risk, realize diversification effects and take advantage of market segmentation on a global scale. Even though these advantages might appear attractive, the risks of and constraints for international portfolio investment must not be overlooked. In an international context, financial investments are not only subject to currency risk and political risk, but there are many institutional constraints and barriers, significant among them a host of tax issues. These constraints, while being reduced by technology and policy, support the case for internationally segmented securities markets, with concomitant benefits for those who manage to overcome the barriers in an effective manner.
ISSN:0963-8008
1468-0416
DOI:10.1111/1468-0416.00043