Determinants of foreign portfolio investment: the case of Jordan

Abstract

This study investigates the determinants of foreign portfolio investment in Jordan using series of data covering the period from 2000 to 2016. Eight independent variables were employed. They are: aggregate economic activity, inflation, interest rate differentiation, stock market performance, risk diversification, country creditworthiness, governance, and corruption. The regression results show that good and stable macroeconomic environment attracts foreign investors. In addition, foreign investors prefer to invest in the capital market which provides an opportunity of risk diversification. A country that has enough liquidity to meet its obligation, and has well-governed environment attracts more portfolio investment. The results of the study provide empirical evidence about the factors that have a significant impact on the flow of foreign portfolio investment to Jordan. These factors can be utilized when formulating polices by the specialized authorities who are seeking to attract more portfolio investment.