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dc.contributor.authorBaker, Malcolm-
dc.contributor.authorFoley, C. Fritz-
dc.contributor.authorWurgler, Jeffrey-
dc.date.accessioned2008-05-27T14:34:20Z-
dc.date.available2008-05-27T14:34:20Z-
dc.date.issued2004-12-22-
dc.identifier.urihttp://hdl.handle.net/2451/26651-
dc.description.abstractWe outline and test two theories of foreign direct investment based on capital market mispricing. The “cheap assets” or “fire-sale” theory considers FDI inflows as the purchase of undervalued host country assets, while the “cheap financial capital” theory views FDI outflows as a natural use of the relatively low-cost capital available to overvalued firms in the source country. The results are consistent with the cheap financial capital theory: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source country valuations and negatively related to future source country stock returns, especially when capital account restrictions limit cross-country arbitrage.en
dc.language.isoen_USen
dc.relation.ispartofseriesSC-AM-04-05en
dc.titleSTOCK MARKET VALUATIONS AND FOREIGN DIRECT INVESTMENTen
dc.typeWorking Paperen
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