Title: International investment positions and risk-sharing: an empirical analysis on the coordinated portfolio investment survey
Authors: Filippo M. Pericoli; Eleonora Pierucci; Luigi Ventura
Addresses: Department of the Treasury of the Italian Ministry of Economy and Finance, Via XX Settembre 97, Roma 00187, Italy ' Department of Mathematics, Computer Science and Economics, University of Basilicata, Via dell’Ateneo Lucano 10, 85100, Potenza, Italy ' University of Roma La Sapienza, Via del Castro Laurenziano 9, Roma 00161, Italy
Abstract: We explore the determinants of bilateral portfolio investments and their dynamics by using data from nine waves of the IMF coordinated portfolio investment survey (CPIS). The main goal of our analysis is that of understanding whether a diversification motive can be found, among the various determinants. As diversification variable, we use the correlation between the idiosyncratic components of gross domestic product (GDP) growth and take into account unobserved heterogeneity by means of a country pair-fixed effect panel model. We find strong evidence that a diversification motive is relevant to explain bilateral portfolio holdings. It also turns out that investing in stocks of less synchronised partner economies contributes to income smoothing to some extent.
Keywords: IMF CPIS; coordinated portfolio investment survey; risk sharing; gravity models; international investment positions; modelling; diversification; bilateral portfolio holdings; income smoothing.
International Journal of Computational Economics and Econometrics, 2015 Vol.5 No.4, pp.364 - 391
Received: 27 Jun 2014
Accepted: 28 Oct 2014
Published online: 08 Oct 2015 *