Cross-border portfolio investment in the APEC region

This paper aims to establish a firm understanding of the structure and determinants of bilateral portfolio investment among APEC economies. The paper demonstrates that APEC membership has a significantly positive relationship with financial transactions among members. That is, as compared with non-members, APEC member economies purchase more equities and long-term bonds from other APEC member economies. However, the APEC membership effect is not uniform: the positive effect of APEC membership is mainly due to the overshadowing role of East Asian countries. This finding is especially evident for equities, rather than for long-term bonds. This paper also shows that a large part of the regional financial market integration in the APEC region is due to strong linkages of intra-regional goods trade in the region.