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

• 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
• Institution: Mahidol University

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%.