Correlation aversion in foreign direct investment

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2025-01-01 DOI:10.1016/j.frl.2024.106728

Navruz Khotamov, Naoto Jinji

引用次数: 0

Abstract

Decisions under risk are often multidimensional, where the preferences of the investor depend on several factors. Investment theory implies that in the presence of different shocks, the correlation between these shocks is important. This study analyzes the relationship between the correlation of two shocks and foreign direct investment (FDI). The sources of shocks, in this study, are related to demand and exchange rate in the destination market. Constructing large panel data on industry-level FDI, we analyze FDI under correlation risk. We show that in the presence of two shocks, industry-level FDI flows exhibit correlation aversion and that the correlation of two distinct shocks explains significant variation in geographic allocation of FDI at the industry-level.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance