The Determinants of International Equity Holdings: Information vs. Culture

Erkin Diyarbakirlioglu (1)

1 IRG - Institut de Recherche en Gestion

I examine whether the effect of physical distance on the geography of international portfolio investments undergoes an informational or a cultural channel. Using two measures to disentangle the effects of the physical distance, namely the cultural distance proposed by Kogut and Singh (1988), and a new measure of the information distance, I analyze a panel dataset showing 24 source countries’ bilateral equity holdings in various destinations as of the end-2006. Regressions suggest that the effect of the geography on international portfolio investments is likely to be a phenomenon linked to information asymmetries rather than one reflecting the impact of the cultural proximity between countries.

Mots clés: information distance; cultural distance; gravity model; home bias

Domaines: Economies et finances

Erkin Diyarbakirlioglu. The Determinants of International Equity Holdings: Information vs. Culture. 28th AFFI Conference, May 2011, Montpellier, France. ⟨hal-03642469⟩