Determinants of foreign portfolio investment: the case of Jordan
-
DOIhttp://dx.doi.org/10.21511/imfi.15(1).2018.27
-
Article InfoVolume 15 2018, Issue #1, pp. 328-336
- Cited by
- 2562 Views
-
825 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This study investigates the determinants of foreign portfolio investment in Jordan using series of data covering the period from 2000 to 2016. Eight independent variables were employed. They are: aggregate economic activity, inflation, interest rate differentiation, stock market performance, risk diversification, country creditworthiness, governance, and corruption. The regression results show that good and stable macroeconomic environment attracts foreign investors. In addition, foreign investors prefer to invest in the capital market which provides an opportunity of risk diversification. A country that has enough liquidity to meet its obligation, and has well-governed environment attracts more portfolio investment. The results of the study provide empirical evidence about the factors that have a significant impact on the flow of foreign portfolio investment to Jordan. These factors can be utilized when formulating polices by the specialized authorities who are seeking to attract more portfolio investment.
- Keywords
-
JEL Classification (Paper profile tab)G10
-
References27
-
Tables5
-
Figures0
-
- Table 1. Net investment of non-Jordanians in ASE (JD million)
- Table 2. Correlation matrix of the independent variables
- Table 3. Results of Augmented Dickey-Fuller (ADF) unit root test
- Table 4. Results of OLS regression analysis
- Table 5. Results of granger causality tests
-
- Abdioglu, N., Khurshed, A., & Stathopoulos, K. (2013). Foreign institutional investment: Is governance quality at home important? Journal of International Money and Finance, 32, 916-940.
- Aduda, J., Masila, J. M., & Onsongo, E. N. (2012). The Determinants of Stock Market Development: The Case for the Nairobi Stock Exchange. International Journal of Humanities and Social Science, 2(9), 214-230.
- Ahmad, F., Draz, M. U., & Yang, S.-C. (2015). Determinants of Foreign Portfolio Inflows: Analysis and Implications for China. Asian Journal of Finance & Accounting, 7(2), 66-77.
- Albulescu, C. T. (2015). Do Foreign Direct and Portfolio Investments Affect Long-term Economic Growth in Central and Eastern Europe? Procedia Economics and Finance, 23, 507-512.
- Amman Stock Exchange (2016). 2000–2016 annual report. Amman: ASE.
- Atobrah, R. (2015). Determinants of Foreign Portfolio Investment: Evidence from Sub-Saharan Africa (Unpublished master’s thesis). University of Ghana, Ghana.
- Bakir, A., & Alfawwaz, T. (2009). Determinants of foreign direct investment in Jordan. International Management Review, 5(2), 65-72.
- Bley, J., & Saad, M. (2011). The effect of financial liberalization on stock-return volatility in GCC markets. Journal of International Financial Markets, Institutions and Money, 21(5), 662-685.
- Das, P. (2014). The role of corporate governance in foreign investments. Applied Financial Economics, 24(3), 187-201.
- Evans, K. (2002). Foreign portfolio and direct investment: complementarity, differences and integration. Paper presented at the OCDE Global Forum on International Investment: Attracting Foreign Direct Investment of Development.
- Garg, R., & Dua, P. (2014). Foreign portfolio investment flows to India: determinants and analysis. World Development, 59, 16-28.
- Ghunmi, D. A., Al-Zu’bi, B., Badreddine, S., & Chaudhry, S. (2013). Foreign direct investments in Jordan. International Journal of Business, 18(3), 255-272.
- Gui-Diby, S. L. (2014). Impact of foreign direct investments on economic growth in Africa: Evidence from three decades of panel data analyses. Research in Economics, 68(3), 248-256.
- Idowu, O. O. (2015). Foreign Portfolio Investment in Nigeria. International Journal of Social Relevance & Concern, 3(5), 8-19.
- Jain, P. K., Kuvvet, E., & Pagano, M. S. (2017). Corruption’s impact on foreign portfolio investment. International Business Review, 26(1), 23-35.
- Kania-Morales, J., & Mroz, R. (2014). Relationship between foreign direct investment stock and foreign portfolio investment stock. Do they really matter for GDP in Poland, Germany, and Great Britain? Ekonomia journal, 38, 97-127.
- Khrawish, H. A., & Siam, W. Z. (2010). Determinants of direct foreign investment: Evidence from Jordan. Business and Economic Horizons, 1(1), 67-75.
- Min, B. S., & Bowman, R. G. (2015). Corporate governance, regulation and foreign equity ownership: Lessons from Korea. Economic Modelling, 47, 145-155.
- Naceur, S. B., Ghazouani, S., & Omran, M. (2008). Does stock market liberalization spur financial and economic development in the MENA region? Journal of Comparative Economics, 36(4), 673-693.
- OlugBenga, A. A., & Grace, O. O. (2015). Impact of Foreign Direct Investment on Nigerian Capital Market Development. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(1), 103-108.
- Onuorah, A. C.-C., & Akujuobi, L. E. (2013). Impact of macroeconomic indicators on the performance of foreign portfolio investment in Nigeria. European Journal of Business and Management, 5(2), 81-90.
- Pala, A., & Orgun, B. O. (2015). The Effect of Macroeconomic Variables on Foreign Portfolio Investments: an Implication for Turkey. Journal of Business Economics and Finance, 4(1), 108-126.
- Todea, A., & Plesoianu, A. (2013). The influence of foreign portfolio investment on informational efficiency: Empirical evidence from Central and Eastern European stock markets. Eco-nomic Modelling, 33, 34-41.
- Tuluce, N. S., & Dogan, I. (2014). The Impact of Foreign Direct Investments on SMEs Development. Procedia – Social and Behavioral Sciences, 150, 107-115.
- Umutlu, M., Akdeniz, L., & Altay-Salih, A. (2010). The degree of financial liberalization and aggregated stock-return volatility in emerging markets. Journal of Banking & Finance, 34(3), 509-521.
- Waqas, Y., Hashmi, S. H., & Nazir, M. I. (2015). Macroeconomic factors and foreign portfolio investment volatility: A case of South Asian countries. Future Business Journal, 1(1), 65- 74.
- Yartey, C. A. (2008). The determinants of stock market development in emerging economies: is South Africa different? IMF Working Papers, 1-31.