FOREIGN BIAS of SOVEREIGN WEALTH FUND and SPATIAL SPILLOVER EFFECTS

This study explores a foreign bias model to examine if the degree of foreign bias of sovereign wealth fund depends on the spatial spillover effects of cultural distances. Using the spatial panel data of foreign investment by sovereign wealth fund in 2008-2014, we empirically test (1) whether the relationships between return, risk and foreign bias of sovereign wealth fund are statistically significant and (2) whether this relationship depends on the spatial spillover effects of cultural distances. The evidence strongly supports our hypotheses across six target countries (Australia, Canada, China, Germany, the United Kingdom and the United States).