International investment patterns: evidence using a new dataset

Abstract

This paper examines the bilateral, source and host factors driving portfolio equity investment across countries, using International Monetary Fund’s new dataset on international equity holdings at the end of 1997, 2001 and 2002. This paper illustrates a model that links bilateral equity holdings to bilateral trade in goods and services. This paper finds that the bilateral equity investment is strongly correlated with the underlying patterns of trade in goods and services. The size of domestic stock market is the key correlate of aggregate foreign portfolio equity asset and liability holdings. The scale of aggregate foreign equity asset holdings is larger for countries having more per capita income.