Foreign direct investment vs. foreign portfolio investment
By: Goldstein Itay [i.e. Itay Goldstein], Assaf Razin.
Contributors: Razin, Assaf.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 11047.; Working paper series (National Bureau of Economic Research) -- working paper no. 11047.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 33
Subjects: Investments, Foreign -- Mathematical models; Portfolio management -- Mathematical models
Other titles: Foreign direct investment versus foreign portfolio investment.
Description: "The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI is characterized by hands-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority, relative to FPI, comes with a cost: a firm owned by the relatively well-informed FDI investor has a low resale price because of a "lemons" type asymmetric information between the owner and potential buyers. The model can explain several stylized facts regarding foreign equity flows, such as the larger ratio of FDI to FPI inflows in developing countries relative to developed countries, and the smaller volatility of FDI net inflows relative to FPI net inflows"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 31-33).

Also available in PDF from the NBER world wide web site (www.nber.org).