Information and capital # ows : The determinants of transactions in " nancial assets

@inproceedings{Portes2001InformationAC,
  title={Information and capital # ows : The determinants of transactions in " nancial assets},
  author={Richard Portes and B He and l{\`e}ne Rey and Yonghyup Oh},
  year={2001}
}
We show that a gravity model explains international transactions in "nancial assets at least as well as goods trade transactions. Our results support the hypothesis that informational asymmetries are responsible for the strong negative relationship between asset trade and distance. This result is very important for theories of asset trade, portfolio adjustments and home bias. We strengthen it by investigating the roles of explicit informational variables, as well as distance, in explaining… CONTINUE READING
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