We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the other country, and general equilibrium effects on prices create opportunities for investors in the f...

The interest of Foreign Direct Investors in Latin American countries is growing rapidly; in the period of 1992-2006 the Foreign Direct Investment (FDI) has tripled, from US$27,500 to US$72,440 millions. Investors have the challenge of deciding which country is better for their investments. The problem of selecting a country to invest in is a common topic in the current economic environment. In ...

We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the other country, and general equilibrium effects on prices create opportunities for investors in the f...

Using transaction data from Indonesia, this paper shows that domestic investors have higher profits than foreign investors. In addition, clients of global brokerages have higher long-term and smaller medium (intramonth) and short (intraday) term profits than clients of local brokerages. This suggests that clients of local brokerages have a short-lived information advantage, but that clients of ...

The objective of the paper is to ascertain the influence of shares derivatives trading on the Malaysian stock market. Johansen-Juselius’ co-integration test reveals signs of increasing integration between these cash and futures markets over time. The Granger causality test indicates that the stock index futures Granger causes the cash index with no feedback in the reverse direction during perio...

A security design model shows that multinational firms needing to finance their operations should issue different securities to investors in different countries in order to aggregate their disparate information about domestic and foreign cash flows. However, if the firm becomes bankrupt, investors may face uncertain costs of reorganizing assets in a foreign country and thus may value foreign as...

This paper develops a two-country OLG model under the assumption that investors are on a Bayesian learning path. While investors from both countries receive identical information ßows, domestic investors start off with less precise prior beliefs concerning foreign fundamentals. On a learning path, differences in beliefs and estimation risk generate portfolio biases similar to those observed emp...