The Determinants of American Equity Investment in Australia

Abstract

The purpose of this paper is to establish the determinants which motivate American equity investment in Australia. Both the literature on general investment theory and American direct investments in Australia have emphasised the importance of the return on income, investment diversification, market size, economic growth and, the negative effect of tariffs. This paper uses regression analysis to examine these concepts and contrast their effects with interest rates on the trend of direct American investment. The findings confirm the importance of diversification and the return on income and investment motives and acknowledges the shift in Australia of American equity investment from manufacturing to the mining and service industry sectors.