Foreign Portfolio Investment Inflows to the United States: The Impact of Investor Risk Aversion and U.S. Stock Market Performance

Authors

Peter V. Egly, The University of Texas Rio Grande ValleyFollow
David W. Johnk
Daniel Perez Liston

Document Type

Article

Publication Date

2010

Abstract

This paper examines the relationship of net foreign portfolio investment inflows, namely corporate bonds and stocks, to two pull factors; investor risk aversion and the US stock market. Using a vector autoregressive model, we find that positive shocks to the stock market elicit an insignificant response to the net corporate bond inflow and a significant short term positive response to the net corporate stock inflow. The net corporate stock inflow does not respond to risk aversion, while bond inflows do exhibit a significant midterm response to an increase in risk aversion. Consistent with previous empirical findings, the results show that internal country-specific factors may influence foreign portfolio inflows.

Comments

Copyright the authors.

Recommended Citation

Peter Egly, David Johnk, and Daniel Liston. Foreign Portfolio Investment Inflows to the United States: The Impact of Investor Risk Aversion and U.S. Stock Market Performance. North American Journal of Finance and Banking Research. 4, no. 4 (2010): 25–41

First Page

25

Last Page

41

Publication Title

North American Journal of Finance and Banking Research