Reassessing the role of distance on cross-border equity flows: does distance still matter?.

Reassessing the role of distance on cross-border equity flows: does distance still matter?.

Portes and Rey (2005) employ a gravity model to analyze bilateral crossborder equity flows and find that increase in the distance of 1% lowers bilateral crossborder equity flows between 0.66% and 0.88%. Applying the Poisson pseudomaximum likelihood (PPML) estimators reveals that although distance w...

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Bibliographic Details
Main Author: Pandej Chintrakarn
Other Authors: Mahidol University International College. Business Administration Division
Format: Article
Language:English
Published: 2015
Subjects:
Equity flows
Cross-border portfolio investment
Information asymmetries
Gravity model
Home bias
Online Access:https://repository.li.mahidol.ac.th/handle/123456789/47995
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Institution: Mahidol University
Language: English
Description
Summary:Portes and Rey (2005) employ a gravity model to analyze bilateral crossborder equity flows and find that increase in the distance of 1% lowers bilateral crossborder equity flows between 0.66% and 0.88%. Applying the Poisson pseudomaximum likelihood (PPML) estimators reveals that although distance which is a proxy for some information costs still has a significant, negative effect on international asset transactions, the magnitude of the coefficient are generally of much smaller than documented in Portes and Rey (2005). That is, an increase in the distance of 1% lowers bilateral cross-border equity flows between 0.39% and 0.56%.

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