<abstract xmlns="http://www.w3.org/1999/xhtml">
<p>This study seeks to understand the effect of kinship tightness of a society on foreign portfolio diversification. Using data for 42 home investor countries and 44 destination countries for the period of 2004-2021, it is found that investors from more tight-knit kinship societies tend to have smaller proportion of equities invested abroad, thus holding sub-diversified portfolios. The enforcement of these tight kinship societies is based on shame and communal values fostering local monitoring practices which leads to the absence of cooperation and trust, thus reducing stock market participation. It is further shown that kinship tightness can be shaped by enhanced financial literacy, which in turn fosters international diversification. On the other hand, loose kinship societies can be viewed as trust-promoting alternative mechanisms where formal institutions are less effective. </p>
</abstract>

This study seeks to understand the effect of kinship tightness of a society on foreign portfolio diversification. Using data for 42 home investor countries and 44 destination countries for the period of 2004-2021, it is found that investors from more tight-knit kinship societies tend to have smaller proportion of equities invested abroad, thus holding sub-diversified portfolios. The enforcement of these tight kinship societies is based on shame and communal values fostering local monitoring practices which leads to the absence of cooperation and trust, thus reducing stock market participation. It is further shown that kinship tightness can be shaped by enhanced financial literacy, which in turn fosters international diversification. On the other hand, loose kinship societies can be viewed as trust-promoting alternative mechanisms where formal institutions are less effective.

The Nexus Between Foreign Portfolio Diversification and Kinship 

Studia Universitatis Babes-Bolyai Oeconomica

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"The Nexus Between Foreign Portfolio Diversification and Kinship"}

This study seeks to understand the effect of kinship tightness of a society on foreign portfolio diversification. Using data for 42 home investor countries and...

The Nexus Between Foreign Portfolio Diversification and Kinship

Published Online: Sep 14, 2023

Page range: 1 - 16

DOI: https://doi.org/10.2478/subboec-2023-0006

Keywords
international portfolio diversification, kinship, trust, financial literacy

© 2023 Erzsébet-Mirjám Socaciu, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The Nexus Between Foreign Portfolio Diversification and Kinship

Published Online: Sep 14, 2023

Page range: 1 - 16

DOI: https://doi.org/10.2478/subboec-2023-0006

Keywordsinternational portfolio diversification, kinship, trust, financial literacy

© 2023 Erzsébet-Mirjám Socaciu, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
international portfolio diversification, kinship, trust, financial literacy