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For some, global finance is ubiquitous and penetrates into every corner of the world. In this case, the growth of advanced electronic communications coupled with top-down investment strategies has provided institutional investors entry into even the most sheltered of capital markets including those of continental Europe. By contrast, many economic geographers find this view of the world both simplistic with respect to the persistence of nation-state's very different regulatory traditions and highly misleading as to the most successful strategies for investing in continental Europe. In this paper, we provide evidence to support these claims, concentrating upon the issue of whether portfolio investment ought to be sectoral and top-down in orientation (assuming nation-states now matter less than ever before) or country-based and bottom-up in orientation (assuming that there continue to be reasons for taking geography seriously). The geography of market information is our point of departure, illustrated by reference to the evidence on rates of return to different kinds of investment strategies and by reference to the apparent informational content of stock market prices for two German companies Mannesmann (now Vodafone) and BMW (representatives of rather different regional models of capital accumulation). In more detail, we report the results of statistical analyses of the volatility of daily stock market prices for German DAX 30 and DAX 100 firms, arguing that their apparent characteristics have important lessons for the value and significance of bottom-up portfolio investment strategies. These results combined with the case studies of the two German firms are used to suggest that the geography of finance remains a vital component of global finance, an argument which has important implications for academic analysis as well as investment strategy.

How and Where Should We Invest in Europe? An Economic Geography of Global Finance