However, a study on home –bias in Europe, by Kho, Stulz and Warnock point to a preference for investing at home. This is likely also to be the case in the Caribbean. They noted that investors are more optimistic about their home equity markets than about foreign markets – even with free movement of capital.
This means that interest rate differentials need not fully reflect the competitive level needed to keep capital at home. Growing and mutually beneficial economic interdependence among partners typically induces demands for additional regional economic co-operation to exploit more fully the advantages of a maturing regional market. Success is therefore likely to lead to further success.