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Does Regulatory Harmonization Increase Bilateral Asset Holdings?

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  • Vlachos, Jonas

Abstract

By combining new data on bilateral asset holdings with data on securities regulation in an empirical gravity model, it is found that bilateral differences in securities regulation lead to decreased portfolio holdings. Hence, regulatory harmonization can foster financial integration. The results are especially strong for equity holdings. It is verified that the results do not just reflect general economic, institutional, and cultural differences. Additional analysis of causality shows the exogenous component of asset holdings to be associated with larger differences in securities regulation. This might suggest that regulatory differences are used to protect domestic capital markets from outside competition.

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  • Vlachos, Jonas, 2004. "Does Regulatory Harmonization Increase Bilateral Asset Holdings?," CEPR Discussion Papers 4417, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4417
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    Cited by:

    1. Coeurdacier, Nicolas & Guibaud, Stéphane, 2011. "International portfolio diversification is better than you think," Journal of International Money and Finance, Elsevier, vol. 30(2), pages 289-308, March.
    2. Faia, Ester & Ottaviano, Gianmarco I. P. & Sanchez Arjona, Irene, 2017. "International expansion and riskiness of Banks," LSE Research Online Documents on Economics 83615, London School of Economics and Political Science, LSE Library.
    3. Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp346, IIIS.
    4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1095-1131.
    5. Giofré, Maela, 2017. "Financial education, investor protection and international portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 71(C), pages 111-139.
    6. repec:ecb:ecbwps:20141799 is not listed on IDEAS
    7. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g70969520 is not listed on IDEAS
    8. Balli, Faruk & Basher, Syed Abul & Rana, Faisal, 2014. "The determinants of the volatility of returns on cross-border asset holdings," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 1-23.
    9. Fathi Abid & Slah Bahloul, 2010. "Selected MENA Countries’ Attractiveness to G7 Investors," Working Papers 531, Economic Research Forum, revised 07 Jan 2010.
    10. Berkel Barbara, 2007. "Institutional Determinants of International Equity Portfolios - A Country-Level Analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-33, October.
    11. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series iiisdp265, IIIS.
    12. Giofré, Maela/M., 2009. "Investor protection and foreign stakeholders," MPRA Paper 20238, University Library of Munich, Germany, revised Jan 2010.
    13. Habib, Maurizio Michael & Floreani, Vincent Arthur, 2015. "Financial exposure to the euro area before and after the crisis: home bias and institutions at home," Working Paper Series 1799, European Central Bank.
    14. repec:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g70969520 is not listed on IDEAS
    15. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g70969520 is not listed on IDEAS
    16. Giofré, Maela, 2013. "Investor protection rights and foreign investment," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 506-526.
    17. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g70969520 is not listed on IDEAS
    18. Abid, Fathi & Bahloul, Slah, 2011. "Selected MENA countries' attractiveness to G7 investors," Economic Modelling, Elsevier, vol. 28(5), pages 2197-2207, September.
    19. Coeurdacier , Nicolas & Martin, Philippe, 2007. "The geography of asset holdings: Evidence from Sweden," Working Paper Series 202, Sveriges Riksbank (Central Bank of Sweden).
    20. Giofré, Maela, 2014. "Domestic investor protection and foreign portfolio investment," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 355-371.
    21. Giofré, Maela, 2013. "International diversification: Households versus institutional investors," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 145-176.
    22. Balli, Faruk & Balli, Hatice Ozer & Basher, Syed Abul & Karimova, Amira & Wang, Aihua, 2019. "Determinants of sector of holders international equity holdings," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 329-338.

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    More about this item

    Keywords

    Cross-border portfolio investments; Gravity model; Harmonization; Home bias; Integration; Securities;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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