Portfolio investments or foreign institutional investments have become increasingly evident for developing countries. Though their presence is short-term in the domestic markets, they help the economy have a higher degree of liquidity with higher price earning ratios and in turn reduce the cost of capital for investment. They are largely determined by the performance of the domestic stock markets in relation to the markets worldwide. With the liberalization of stock markets in various economies to foreign investors, investors in developed countries have gradually sought to appreciate the prospective for portfolio diversification of these markets. Such investments are referred to as hot money because of their volatility. Against this background, this book covers some of the issues and challenges that these investments pose and some country experiences.
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