THE RELATIONSHİP BETWEEN INTERNATIONAL EQUITY INVESTMENTS AND TRADE IN THE FRAMEWORK OF THE RISK HEDGING APPROACH

Year 2021, , 475 - 490, 29.09.2021

Sinem Atıcı Ustalar

https://doi.org/10.17065/huniibf.794085

Abstract

The aim of the study is to analyze the risk hedging effect of bilateral trade on bilateral equity investment. The analysis is realized with the financial gravity model for 2001-2018 years. Bilateral equity invetment and bilateral export variables of 65 countries and traditional gravity variables are used in the model. The model is estimated with Ordinary Least Squares (OLS) and Poisson-Pseudo Maximum Likelihood (PPML) estimators in the first stage. Two-Stage Least Squares (2SLS) estimator with Instrumental Variables method is used to control the endogeneity problem between export and bilateral equity investment in the second stage. According to the model results, the increasing export between source and destination country decreases the equity risk for foreign investors and raises bilateral equity investment between them. Therefore, bilateral export across countries has risk hedging effect on bilateral equity investment. 

Keywords

International financial asset trade, international goods trade, gravity model, instrumental variables (IV) estimation

RİSKTEN KORUNMA YAKLAŞIMI ÇERÇEVESİNDE ULUSLARARASI HİSSE SENEDİ YATIRIMLARI İLE TİCARET ARASINDAKİ İLİŞKİ

Abstract

Çalışmanın amacı ülkeler arasındaki ikili mal ticaretinin ikili hisse senedi yatırımları üzerindeki riskten korunma etkisini analiz etmektir. Analiz, finansal çekim modeli ile 2001-2018 yılları için gerçekleştirilmiştir. Modelde 65 ülkenin ikili hisse senedi yatırımları, ikili ihracat ve geleneksel çekim değişkenleri kullanılmıştır. Model ilk aşamada En Küçük Kareler (EKK) ve Poisson-Pseudo En Çok Olabilirlik (PPML) tahmincileri ile tahminlenmiştir. İkinci aşamada ise ihracat ve ikili hisse senedi yatırımları arasındaki içsellik probleminin kontrolü için Araç değişkenler yöntemi ile İki Aşamalı EKK (2AEKK) tahmincisi kullanılmıştır. Model sonuçlarına göre, kaynak ve destinasyon ülke arasındaki artan ihracat, yabancı yatırımcı için hisse senedinin riskini azaltmakta ve ikili hisse senedi yatırımını artırmaktadır. Dolayısıyla, ülkeler arasındaki ihracat ikili hisse senedi yatırımı üzerinde riskten korunma etkisine sahiptir.

Keywords

Uluslararası Hisse senedi Ticareti, Uluslararası Mal Ticareti, Çekim Modeli, Araç Değişken (IV) Tahmincisi

References

• Aggarwal, R., C. Kearney, B. Lucey (2012), “Gravity and Culture in Foreign Portfolio Investment”, Journal of Banking and Finance, 2(36), 525–538.
• Anderson, J. E., E. van Wincoop (2003), “Gravity with Gravitas: A Solution to the Border Puzzle”, The American Economic Review, 93(1), 170-192.
• Aviat, A., N. Coeurdacier (2007), “The Geography of Trade in Goods and Asset Holdings”, Journal of International Economics, 71(1), 22-51.
• Bulow, J., K. Rogoff (1989), “Sovereign Debt: Is to Forgive to Forget?”, American Economic Review, 1(79), 43-50.
• Chitu, L. B. Eichengreen, A. J. Mehl (2013), “History, Gravity and International Finance”, Journal of International Money and Finance, 46, 104-129.
• Coeurdacier N. (2009), “Do Trade Costs in Goods Market Lead to Home Bias in Equities?”,Journal of International Economics, 1(77), 86-100.
• Coeurdacier N., P. Martin (2009), “The Geography of Asset Trade and The Euro: Insiders and Outsiders”, Journal of The Japanese and International Economies, 23(2), 90–113.
• Daude, C., M. Fratzscher (2008), “The Pecking Order of Cross-Border Investment”, Journal of International Economics, 74(1), 94-119.
• De Santis, R. A. (2010), “The Geography of International Portfolio Flows, International CAPM, and TheRole of Monetary Policy Frameworks”, SSRN Electronic Journal, 6(2), 147-197.
• Galtsyan, V., P. R. Lane (2013), “Bilateral Portfolio Dynamics During The Global Financial Crisis”, European Economic Review, 57, 63–74.
• Galtsyan, V., P. R. Lane, C. Mehigan, R. Mercado (2016), “The Holders and Issuers of International Portfolio Securities”, Journal of the Japanese and International Economies, 42, 100-108.
• Grinblatt, M., M. Keloharju (2001), “How Distance, Language, and Culture Influence Stock Holdings and Trades”, The Journal of Finance, 56(3), 1053-1073.
• Hellmanzik, C., M. Schmitz (2017), “Taking Gravity Online: The Role of Virtual Proximity in International Finance”,Journal of International Money and Finance,77, 164-179.
• Karolyi, G. A. (2016), “The Gravity of Culture for Finance”, Journal of Corporate Finance, 41(C), 610-625.
• Kpodar, K., P. Imam (2016), “Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation: RTAs and Growth Volatility”, Review of International Economics, 24(5).
• Krugman, P., M. Obstfeld, M. Melitz (2012), International Economics: Theory and Policy, United States of America: Pearson Education, Inc.
• Lane, P. R., G. M. Mılesi-Feretti (2008), “International Investment Patterns”, The Review of Economics and Statistics, 90(3), 538-549.
• Mehigan, C. (2016), “Bilateral Adjustment of Bank Assets: Boom and Bust”, Trinity Economics Papers, No. 0616, Trinity College Dublin.
• Martinez, J. V., G. Sandleris (2011), “Is it Punishment? Sovereign Defaults and the Decline in Trade”, Journal of International Money and Finance, 6(30), 909-930.
• Melitz, J. (2008), “ Language and Foreign Trade”, European Economic Review, 4(52), 667-699.
• Mercado, R. (2018a), “Bilateral Capital Flows: Gravity, Push, And Pull”, The South East Asian Central Banks (SEACEN) Research and Training Centre (80416-M) Working Paper, No. 5, Kuala Lumpur, Malaysia.
• Mercado, R. (2018b), “Bilateral Capital Flows: Transaction Patterns and Gravity”, Trinity Economics Papers, No. 0218, Trinity College Dublin.
• Obstfeld, M., K. Rogoff (2001), “The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?”, National Bureau of Economic Research (NBER) Macroeconomics Annual 2000, ABD: MIT Press, 25, 339-412.
• Okawa, Y., E. van Wincoop (2012), “Gravity in International Finance”, Journal of International Economics, 87(2), 205-215.
• Portes, R., H. Rey (2005), “The Determinants of Cross-Border Equity Flows”, Journal of International Economics, 65(2), 269-296.
• Rose, A. K. (2005), “One Reason Countries Pay Their Debts: Renegotiation and International Trade”, Journal of Development Economics, 77(1), 189-206.
• Rose, A. K., M. M. Spiegel (2004), “A Gravity Model of Sovereign Lending: Trade, Default, and Credit”, IMF Staff Papers, Special Issue: IMF Fourth Annual Research Conference, ABD, 50-63.
• Salıns, V., A. Benassy-Quere (2006), “Institutions and Bilateral Asset Holdings”, CEPII Research CenterWorking Papers, 2006-19.
• Santos Silva, J.M. C., S. Tenreyro (2006), “The Log of Gravity”, Review of Economics and Statistics, 88(4), 641-658.
• Tinbergen, J. (1962), An Analysis of World Trade Flows, in Shaping the World Economy,New York, NY: Twentieth Century Fund.
• Wooldridge, J. (2009), Introductory Econometrics: A Modern Approach, by Nelson Education, Ltd., Canada.