Abstract
We analyze whether cross-national distance between professional money managers and the positions they take in foreign markets affects investment performance. Out of four dimensions of cross-national distance (geography, culture, business climate, and industry), we find that only cultural distance inversely relates to portfolio performance. Investors earn higher returns in culturally similar foreign markets when market conditions in these countries are favorable. Our results show that the culture-based patterns in foreign portfolio allocations are associated with an information advantage and suggest that multinational corporate decisions influenced by culture increase firm value.
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Acknowledgments
We thank the editor (Lemma Senbet) and three anonymous referees for excellent comments that were instrumental in improving the paper. We also thank Alexandre Skiba and conference participants at meetings of the Southern Finance Association, Academic Research Colloquium for Financial Planning and Related Disciplines, Financial Management Association, Australasian Finance and Banking Conference, Asian Finance Association, European Financial Management Association, Eastern Finance Association, Paris Financial Management Conference, and seminar participants at Florida Atlantic University. We acknowledge financial support from Social Sciences and Humanities Research Council (SSHRC) Insight Development Grant and Brock University SSHRC Institutional Grant.
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Accepted by Lemma Senbet, Area Editor, 28 May 2022. This article has been with the authors for three revisions.
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Fedenia, M., Skiba, H. & Sokolyk, T. The performance of active investment positions in foreign markets. J Int Bus Stud 54, 285–305 (2023). https://doi.org/10.1057/s41267-022-00548-0
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DOI: https://doi.org/10.1057/s41267-022-00548-0