Exports and FDI in the Presence of Downside Risk

This study analyzes the impact of downside risk on the flow of exports, affiliate sales, and their joint patterns. Existing studies in this field have not considered the effects of risk asymmetry or downside risk because they describe risk only by the variance; therefore, this study attempts to fill this gap. Using a panel of industry-level data on trade and affiliate sales for a large number of home and destination countries, and focusing on downside risk, I show that downside risk explains the variation in the flow of exports, affiliate sales, and the proximity-concentration tradeoff