Your next holiday may hold the key to your future equity investments

Tourists are significantly more likely to invest in the stockmarkets of the countries they visit.

As people book their late summer getaways, this is the finding of a new academic study which has revealed a surprising link between leisure and global financial flows.

The paper, titled Seeing is believing: Tourism and foreign equity investments, draws on over two decades of data from more than 30 countries. It finds that international tourism doesn’t just boost local economies through spending on hotels and restaurants – it also increases foreign investment in stockmarkets.

The research was co-authored by Constantinos Antoniou, Associate Professor of Finance & Behavioural Science, alongside three other academics: Carina Cuculiza, of the University of Kansas, Alok Kumar, of the Miami Herbert Business School, and Lizhengbo Yang, of the Capital University of Economics and Business in Beijing.

Using econometric techniques, the authors found that a one standard deviation increase in travel between two countries, say from France to Italy, leads to a 12-15 per cent rise in equity investment from the visiting country.

This holds true for both retail (individual) and institutional (professional) investors.

“This isn’t about insider knowledge or financial analysis,” said Dr Antoniou. “It’s about familiarity. When people travel abroad, the country becomes more mentally available to them. They’re more likely to remember it, trust it, and ultimately invest in it. Seeing is believing.”

The study uses equity investment data from the Interantional Monetary Fund’s (IMF) Coordinated Portfolio Investment Survey and details of institutional fund holdings from FactSet, combined with tourism statistics from the UN World Tourism Organization.

The researchers also controlled for a wide range of economic, psychological and geographic factors to isolate the effect of tourism. 

The findings have important implications for the long-standing phenomenon of ‘home bias’ – the tendency of investors to favour domestic markets despite the benefits of international diversification. According to the authors, tourism acts as a subtle psychological nudge, encouraging individuals and institutions to look beyond their borders, thus reducing the home bias.  

“Travel experiences shape our perceptions in powerful ways,” Dr Antoniou said. “They reduce the psychological distance between countries. That’s why we see investors holding fewer domestic stocks and shares after travelling abroad – they’re more comfortable branching out.”

Diversifying your investment portfolio

To test whether the relationship was causal rather than coincidental, the team employed a range of rigorous techniques for the sample period between 2001 and 2021. These included using natural tourist attractions like UNESCO World Heritage sites as instrumental variables, and analysing the impact of major events such as the Olympics and the SARS outbreak.

Their conclusion: when tourism rises, so does investment. When it falls, investment declines.  

The implications are far-reaching. For policymakers, the research suggests that promoting tourism could have long-term financial benefits beyond the travel sector. For investors, it highlights the value of global exposure – not just through data, but through direct experience.

“Tourism is often seen as a luxury or a leisure activity,” said Dr Antoniou. “But our research shows it can be a gateway to investors building more internationally diversified portfolios.

“It’s a nudge towards smarter investing.”

Constantinos Antoniou is Associate Professor of Finance and Behavioural Science at Warwick Business School. He teaches Behavioural Finance on the MSc Accounting & Finance, MSc Finance, MSc Mathematical Finance and MSc Finance & Economics courses. He also teaches Behavioural Finance: Psychology and Financial Decisions on the Executive MBA and Executive MBA (London) programmes. 

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