International investment positions revisited: Investor heterogeneity and individual security characteristics

Abstract

Abstract This paper contributes to the literature by empirically documenting the importance of investor heterogeneity and security level characteristics for international investment positions. We estimate a standard gravity model to explain holdings in individual bonds and stocks for euro area investors covering 2013Q4–2018Q4. First, our results confirm the importance of market size and distance, but there are significant differences between banks, insurance companies and pension funds, investment funds, households and other investors. Second, we show the statistical significance and economic relevance of security characteristics such as currency, bond maturity and dividend yield. Third, the results are robust to including domestic holdings.

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