portfolio equity is regressed on a variable Lane and Milesi-Ferretti call “Stock Return.” That variable is defined as “the weighted average of stock returns on individual markets, as reported by MSCI, where the weights reflect the country’s allocation of portfolioequityassets as reported in the IMF 1997 Portfolio Survey.” In other words, it is measuring exactly the same thing that real return on portfolio equity is trying to measure—the return on each country’s portfolio of equities. It uses an entirely different measure of returns from an entirely different data source
In recent decades, the foreign assets and liabilities of advanced economies have grown rapidly relative to GDP, with the increase in gross cross-holdings far exceeding changes in the size of net positions. Moreover, the portfolio equity and FDI categories have grown in importance relative to international debt stocks. This paper describes the broad trends in international financial integration for a sample of industrial countries and seeks to explain the cross-country and time-series variation in the size of international balance sheets. It also examines the behavior of the rates of return on foreign assets and liabilities, relating them to "market" returns.
The Swiss banking system is characterized by a two-tier structure. The first tier is composed of the two large banks and some smaller banks focused on private banking, all of which have a significant international presence. These banks represent, so to speak, the “international face” of the Swiss banks. They are mostly joint-stock companies or privately owned (unlimited personal liability). The second tier is composed of a varied group of banks, mostly focused on domestic, or even regional, business.