A Mean-Variance Explanation of FDI Flows to Developing Countries
Publikation: Working paper › Forskning
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A Mean-Variance Explanation of FDI Flows to Developing Countries. / Sunesen, Eva Rytter.
Department of Economics, University of Copenhagen, 2008.Publikation: Working paper › Forskning
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TY - UNPB
T1 - A Mean-Variance Explanation of FDI Flows to Developing Countries
AU - Sunesen, Eva Rytter
N1 - JEL classfications: F21, G11, R11, E32
PY - 2008
Y1 - 2008
N2 - An important feature of the world economy is the close global and regional integration due to strong trade and investment relations among countries. The high degree of integration between countries is likely to give rise to business cycle synchronisation in which case shocks will spillover from one country to another. This will have implications for the way investors evaluate the return and risk of investing abroad. This paper utilises a simple mean-variance optimisation framework where global and regonal factors capture the interdependence between countries. The model implies that FDI is driven by the risk-adjusted rate of return as well as global and regional spillovers. The preditions of the model are con…rmed in a sample of 60 countries over the period 1970-2000.
AB - An important feature of the world economy is the close global and regional integration due to strong trade and investment relations among countries. The high degree of integration between countries is likely to give rise to business cycle synchronisation in which case shocks will spillover from one country to another. This will have implications for the way investors evaluate the return and risk of investing abroad. This paper utilises a simple mean-variance optimisation framework where global and regonal factors capture the interdependence between countries. The model implies that FDI is driven by the risk-adjusted rate of return as well as global and regional spillovers. The preditions of the model are con…rmed in a sample of 60 countries over the period 1970-2000.
KW - Faculty of Social Sciences
KW - foreign direct investment
KW - risk
KW - portfolio
KW - business cycles
M3 - Working paper
BT - A Mean-Variance Explanation of FDI Flows to Developing Countries
PB - Department of Economics, University of Copenhagen
ER -
ID: 5520419