A Mean-Variance Explanation of FDI Flows to Developing Countries

An important feature of the world economy is the close global and regional integration due to strong trade and investment relations among countries. The high degree of integration between countries is likely to give rise to business cycle synchronisation in which case shocks will spillover from one country to another. This will have implications for the way investors evaluate the return and risk of investing abroad. This paper utilises a simple mean-variance optimisation framework where global and regonal factors capture the interdependence between countries. The model implies that FDI is driven by the risk-adjusted rate of return as well as global and regional spillovers. The preditions of the model are con…rmed in a sample of 60 countries over the period 1970-2000.foreign direct investment, risk, portfolio, business cycles

Measuring Idiosyncratic Risk: Implications for Capital Flows

This paper offers two refinements of the traditional risk measure based on the volatility of growth. First, we condition GDP growth on structural characteristics of the host country that move only slowly and therefore can be partly predicted by an investor. Second, we adjust conditional risk for the systematic components due to the global and regional interdependence between alternative investment locations. The decomposition of conditional risk into its systematic and idiosyncratic components reveals that not only are African countries on average characterised by a larger conditional risk than Asian and Latin American countries, but the idiosyncratic risk factor also represents a larger share than in other developing countries. As a final contribution, we search the empirical literature on foreign direct investment and risk in order to determine which of the suggested risk measures provide the best description of idiosyncratic risk. Using a general-to-specific methodology, we find that both economic and political risk factors are important elements in the investment decision. We also find that commercial risk factors applied in the literature so far are poor determinants of idiosyncratic risk.foreign direct investment; global and regional business cycles; risk decomposition

Examining the Regional Aspect of Foreign Direct Investment to Developing Countries

This paper applies a general-to-specific analysis to detect regularities in the driving forces of foreign direct investment (FDI) that can explain why some regions are more attractive to foreign investors than others. The results suggest that regional differences in FDI inflows to African, Asian and Latin American countries can be fully explained by structural characteristics rather than fixed regional effects. The implication of this finding is that countries that are lagging behind other developing countries in attracting foreign capital have the opportunity to implement policies aimed at improving the investment climate for foreign investors. This also means that there is no African bias. Among a large number of return and risk variables applied in the empirical literature, growth and inflation turn out to be the only robust and significant FDI determinants across regions although the size of their impact varies.foreign direct investment; Africa, Asia; Latin America; general-to-specifc

Efficient Ranking of Lyndon Words and Decoding Lexicographically Minimal de Bruijn Sequence

We give efficient algorithms for ranking Lyndon words of length n over an alphabet of size {\sigma}. The rank of a Lyndon word is its position in the sequence of lexicographically ordered Lyndon words of the same length. The outputs are integers of exponential size, and complexity of arithmetic operations on such large integers cannot be ignored. Our model of computations is the word-RAM, in which basic arithmetic operations on (large) numbers of size at most {\sigma}^n take O(n) time. Our algorithm for ranking Lyndon words makes O(n^2) arithmetic operations (this would imply directly cubic time on word-RAM). However, using an algebraic approach we are able to reduce the total time complexity on the word-RAM to O(n^2 log {\sigma}). We also present an O(n^3 log^2 {\sigma})-time algorithm that generates the Lyndon word of a given length and rank in lexicographic order. Finally we use the connections between Lyndon words and lexicographically minimal de Bruijn sequences (theorem of Fredricksen and Maiorana) to develop the first polynomial-time algorithm for decoding minimal de Bruijn sequence of any rank n (it determines the position of an arbitrary word of length n within the de Bruijn sequence).Comment: Improved version of a paper presented at CPM 201

Optimally edge-colouring outerplanar graphs is in NC

We prove that every outerplanar graph can be optimally edge-coloured in polylogarithmic time using a polynomial number of processors on a parallel random access machine without write conflicts (P-RAM)

Faster Longest Common Extension Queries in Strings over General Alphabets

Longest common extension queries (often called longest common prefix queries) constitute a fundamental building block in multiple string algorithms, for example computing runs and approximate pattern matching. We show that a sequence of $q$ LCE queries for a string of size $n$ over a general ordered alphabet can be realized in $O(q \log \log n+n\log^*n)$ time making only $O(q+n)$ symbol comparisons. Consequently, all runs in a string over a general ordered alphabet can be computed in $O(n \log \log n)$ time making $O(n)$ symbol comparisons. Our results improve upon a solution by Kosolobov (Information Processing Letters, 2016), who gave an algorithm with $O(n \log^{2/3} n)$ running time and conjectured that $O(n)$ time is possible. We make a significant progress towards resolving this conjecture. Our techniques extend to the case of general unordered alphabets, when the time increases to $O(q\log n + n\log^*n)$. The main tools are difference covers and the disjoint-sets data structure.Comment: Accepted to CPM 201