Two more sources on Foreign Direct Investment

Foreign direct investment refers to direct investment equity flows in the reporting economy. It is the sum of equity capital, reinvestment of earnings, and other capital. Direct investment is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy.

In the past I have already posted an item on possible sources with data on Foreign Direct Investment (FDI). These sources are OECD.Stats and Eurostat. Recently I found that there is another source that provides data on FDI: UNCTADSTAT.

Just like the other sources, it is easy to customise by countries, period, etc. Just click on the items you want to change. Export / save options include: Excel and CSV (Comma-Separated Version).

The World Bank World Development Indicators database also covers the subject Foreign Direct Investment. The selection of data for countries, time frame, etc, can all be changed. Export options include Excel, XML and CSV.


Industry and economic classification systems

Many people who do research on companies and markets use a system like the SIC codes or NAICS codes. Both systems allow you to determine the activities for companies. The SIC code system is the oldest of the two and can be downloaded as a variable for companies in many databases. A company can get assigned one or more SIC codes. Sometimes a primary SIC code is given, which indicates the main activity. In essence, the Standard Industrial Classification (SIC) is a system for classifying industries by a four-digit code. The system was originally developed in the United States in 1937, and it is used by US government agencies to classify industry activities.  Basic information is available on Wikipedia.
If your research covers a long time frame it may be necessary to determine whether changes that occur over time in the SIC system have an effect. Luckily, an older version of the SIC code system is available. The U.S. Department of Labor, Occupational Safety & Health Administration website allows the user to search the 1987 version SIC codes.
A more recent version of the SIC system is available on the SEC website of the Division of Corporation Finance: Standard Industrial Classification (SIC) 2011 Code List.

The SIC system is also used by agencies in other countries. In the United ingdom they have developed their own version of the SIC codes. This United Kingdom Standard Industrial Classification of Economic Activities (UK SIC) is used to classify business establishments and other standard units by the type of economic activity in which they are engaged. The new version of these codes (SIC 2007) was adopted by the UK as from 1st January 2008. Older versions of the UK SIC system are also available online, specifically, the UK Standard Industrial Classifications 2007, 2003, and 1992 versions.

The North American Industry Classification System (NAICS) is the system used by US Federal statistical agencies for classifying businesses for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. The NAICS system was developed under the auspices of the Office of Management and Budget (OMB), and adopted in 1997 to replace the Standard Industrial Classification (SIC) system. From 2002 the system is increasingly used. Different versions are available through the US Census website.

The NACE-code (Nomenclature générale des Activités économiques) is a code which is largely used in the European Union and its member states use it to classify commercial and non-commercial economic activities. It is mainly developed as a useful instrument when collecting data and publishing economic statistical overviews. Many companies and organizations exhibit a diverse range of activities. Companies only get assigned a single NACE code, however: the code that indicates the primary acrivity which contributes the most to the total added value of a company. The first version of the NACE was created sometime around 1970. The first revision was published in 1990 and was called NACE Rev. 1. The second major revision (NACE Rev. 1.1) took place in 2002. The second revision was intended to synchronize the system with the  “International Standard Industrial Classification of all economic activities” ISIC of the United Nations. The different NACE versions can be found on the Eurostat website. The Dutch national SBI code system (which replaced the original BIK code system) is based on the NACE system.

The International Standard Industrial Classification of all economic activities, abbreviated as ISIC, is a standard used by the United Nations Statistics Division (UNSD). The ISIC is used to classify economic activities so that entities can be classified according to the activity they carry out.
The ISIC classification combines the statistical units according to their character, technology, organisation and financing of production. The ISIC is used widely, both nationally and internationally, in classifying economic activity data in the fields of population, production, employment, gross domestic product and other economic activities. It is a basic tool for studying economic phenomena, fostering international comparability of data and for promoting the development of sound national statistical systems.
The current and older ISIC versions are available on the statistical website of the United Nations.

When you are using a database, always check the help information to find out what version of an industry code system is being used. If a code system is available but no information on what version it is, you should find out by contacting the owner of the database. Some databases collect data but gather only historical (industry code) information from other sources without using their own version of such as system. The SDC Platinum databases have historical SIC and NAICS codes as they were indicated by the sources that Thomson Reuters uses to collect data.

N.B.: In addition to the aforementioned industry codes there are many more code systems that were developed for statistical purposes in specific countries. The database Amadeus has an easy tool in the help section that allows you to translate specific codes to other codes. This tool is available in the Bureau Van Dijk version of Amadeus:


Risk-Free Rate data sources

The past few years one of the questions I get asked a lot is: what is a good source for the Risk- Free Rate of a country? The definition of Risk-Free Rate or ‘Risk-Free Rate Of Return‘ is: the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time (Investopedia).
As there is no risk free investment, the risk-free rate is usually considered to be the rate on government bonds (by way of a proxy) as a measure of the minimum risk you run on any investment (Wikipedia). The risk of default on payment of interest on government bonds is usually considered to be minimal or non-existent. They are also considered a measure of the financial stability of a country. Two types of government bonds are usually referred to for the benchmark interest rate:

One of the databases that can be used to download the Risk-Free Rate is the OECD.Stats Extract database (a license / subscription is required). Just type in interest rate in the search box on the website and you will get the options in the search result on the left side of the screen. See below:

Both the 3 Month rates and 10 Year Bond interest rates are available for many countries. Next to each nation the darkblue round i-button allows you to call up specific details on the source of the data for each country. The information will be presented on the right side of the screen. Using the options above the default table you can change frequencies, time period, etc. The data can be saved to Excel or as Comma Separated Text (CSV).

A second possibility to get data on the Risk-Free Rate is the IMF International Financial Statistics (IFS) database. Both short term and long term interest rate percentages can be downloaded for government bonds. In the start website you first need to select the option “Data Source” or go directly to the dataset IFS:

Next you need to take 4 steps to create a search: Country, Concept, Data Source & Time. When you get to the second search step (Concept) you can use the Quick filter search bar to search for “Interest rate“:

When you are done making a selection the result is presented as a table. The Table can be edited/changed by clicking the option (top left corner): “Back to query builder“. The result can be exported to Excel or as Comma Separated Text (CSV). The result looks as follows:

A third good database with Risk Free Rate data is Datastream. It has much data (depending on the license) on all sorts of bonds, Notes and treasury bills. The learning curve is bigger if you want to use Datastream compared to OECD.Stats and IMF IFS but it has more data. Datastream, for instance, offers the data frequency options of Weekly and Daily where the OECD and IMF sources only offer the data frequencies Annual, Quarterly and Monthly.
Identifying the right Treasury Bills and 10 Year Government bonds in Datastream is a bit more difficult: some series can be found under the Data Category “Bonds & Convertibles” but most of the 10 Year Government bonds are available under the Data Categories Interest Rates or Economics. The reason is, that the 10 Year Government bonds are considered to be key economic indicators. On the Datastream extranet a list is given of Risk free rate series for several countries but it is in no way a complete list. I suggest you determine their usefullness for yourself.
In a previous blog post you can find out more on Datastream and looking up Government Bond data.

N.B.: There are other sources that also have Risk-Free Rate data but the three mentioned above are (in my view) the best and easiest to customize or use. Some of the other databases are: World Bank Open Data, Eurostat & UN Monthly Bulletin of Statistics. See also: FinaBase blog.


Foreign Direct Investments in countries

One interesting subject for research is Foreign Direct Investment (FDI). In a nusthell this means investments made by a company based in one country, into one or more companies in another country. A more comprehensive and full description is available at Investopedia. There are many different sources out there if you need specific data on FDI. You can visit websites of national statistics bureaus or national banks and they usually offer up reports and data on the subject.

There are two sources that offer detailed data for many countries: Eurostat and OECD.Stats. The Eurostat website offers data for many EU countries and can be accessed free of charge. The part where FDI information is available on OECD.Stats requires a subscription by you or the organisation where you work!

On the Eurostat statistics website the FDI data can be found by navigating to the right place or doing a search. Navigate by clicking :
> Database by themes
> Economy and Finance
> Balance of Payments / International transactions (bop)
> European Union Direct Investments (bop_fdi).

The available data offers FDI breakdowns by main indicators, countries, partner countries & economic activity. See below for a screenshot.

When you choose a specific dataset you can further customize it with the options available: by time period, countries, etc. The data can be saved for a spreadsheet program like Excel:

The OECD.Stats website covers FDI data under the section-theme Globalisation. There are specific datasets on FDI flows (inward and outward): by  industry, by partner country, positions by industry, positions by partner country and BOP and IIP aggregates. When you have selected a dataset it is immediately presented on your screen. It is then possible to customize the dataset and then download the data for a spreadsheet program like Excel:

Both sources use raw data that was originally provided by the statistical bureaus of countries or central banks but has been adjusted afterwards to make the data comparable for the countries. The data from Eurostat comes directly from the National sources. The OECD.Stats data is provided by the OECD and IMF (who in turn probably have received the data from Eurostat or the national statistics sources). The information on the origin of the data is available at both websites.


Datasets in Quandl

Quandl is a new portal that has indexed millions of numerical datasets on the Internet. More information on the background and features is available through their FAQ pages. When you click on a particular dataset listed in the Quandl index, Quandl goes to the original source of that data, extracts the most recent version of that data, cleans it up, and gives it to you in the format of your choice.
Specific topic pages were created on Markets, Economics, Demography & Society.

A big thank you goes to Prof. dr. André Lucas who pointed out the Quandl portal to me.


Historical tax rates

A while ago I needed to find information on tax rates for a couple of countries and had some difficulty finding them in general commercial financial or economic databases. In the end even national bank websites or websites like the those of ministries of finance or the European Union, etc. usually only list the last tax rates or aggregated figures. Wikipedia examples of overviews are:

The World Bank also has information on taxes (no free access!) on their website: World Bank Total Tax rates. The US also has a nice website on taxes in different states, called: US Capital Gains Tax Rates.

What I wanted to find, however, were historical overviews of rates by type for several years. For instance: corporate and capital income taxes. After searching a bit further I finally found the following source for this type of information: the OECD Tax Database.


Referral post to previous blog

My older posts on the earlier blog remain available. Some links to specific sections are: