This paper analyzes the relationship between bilateral trade flows, trade openness, and asset holdings in a three-country stochastic general equilibrium model. The threecountry model set-up enables me to disentangle and separate the effects bilateral trade flows and trade openness have on...

We study the role of bilateral political relations in explaining variations in the equity portfolio allocation of foreign institutional investors. Using a large micro sample at the fund-firm-year level, we find that when the relations between two countries become more distant, institutional...