The recent surge in international portfolio investments reflects the globalization of financial markets. Specifically, many countries have liberalized and deregulated their capital and foreign exchange markets in recent years. Security returns are found to be less correlated across countries than within a country because nations are different from each other in terms of industry structure, natural resources, macroeconomic policies, and have non-synchronous business cycles . In addition, many commercial and investment banks (BMO, iShares, Horizon Beta Pro in Canada, SPDRs, iPath, Direxion in United States) have facilitated international investments by introducing such products as American Depository Receipts (ADRs) and Electronic Traded Funds (EFTs). ADRs do not provide instant diversification therefore investors should form portfolios themselves. Furthermore computer and telecommunication technologies have led to a major reduction in transaction and information costs associated with international investments. In addition, investors might have become more aware of the potential gains from international investments. Foreign portfolio investment is an investment activity that involves the purchase of stocks, bonds, commodities, or money market instruments that are based in a different country. In some cases, these types of investments are short-term in nature, allowing the investor to quickly take advantage of favorable exchange rates to buy and sell the assets . At other times, the foreign portfolio investment is acquired
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