Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154312
Authors: 
Hellmanzik, Christiane
Schmitz, Martin
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1879
Abstract: 
This paper analyses international patterns of bilateral portfolio equity and debt investment in a gravity model framework. We contribute to the literature by exploring the role of virtual proximity – measured by bilateral internet hyperlinks between countries – as a novel proxy for cross-border information flows and cultural proximity more generally. Our findings show that bilateral portfolio investment is significantly affected by virtual proximity, indicating that countries which are more closely connected in terms of web content are more integrated financially. The effect is stronger for equity than for debt investment, highlighting the larger information sensitivity of equity investments, and is largest for investments among advanced economies. Moreover, including virtual proximity in estimations reduces the importance of traditionally-used proxies for information asymmetries and cultural proximity.
Subjects: 
cultural proximity
hyperlinks
information
international capital flows
internet
portfolio investment
JEL: 
F12
F15
Z10
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-1692-9
Document Type: 
Working Paper

Files in This Item:
File
Size
371.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.