Question

What determines the flows of investment capital across borders ?

Which country to invest in?

Which stock to hold?

Answer 1

Flow of investment capital globally can depend upon a lot of factors which could be as follows-

1. Rate of inflation which are prevalentnl different countries

2. Interest rate of different territories in the world

3.political stability of different countries can also be an important factor for investment decision globally.

4.terms of trade and trade restrictions are also an important decision making tool while deciding for which country to invest while going global.

There are are a lot of factors which need to be considered while deciding upon which country to invest in, as there are a lot of risks which cannot be eliminated so it can only be minimised through proper analysis and a well diversified portfolio which can hedge itself from adverse events.

which stocks to select, should be based upon the risk appetite of the investor and it should also be dependent upon which are his home bias and international bias while investment globally and how much currency risk exposure he is going to face, and how much political risk he can bear, with or what is the duration for his investments, so all these factors need to be considered before investment into Global markets