ABSTRACT
Until the early 1960s, the theory of foreign investment was essentially a theory of international portfolio or indirect capital movements. Capital flowed across national borders, mainly (though not exclusively) through the intermediation of the international capital market; and it did so in search of higher interest rates (discounted for exchange and other risks) and/or higher profits relative to those which could be earned at home. The types of financial device that were involved in these cross-national flows of capital were bonds and notes from the public and private sectors, equities, money market instruments and financial derivatives.1
