INVESTMENT THEORY
There are a number of investment theories. Except for MacDougall hypothesis, investment theories are primarily based on imperfect market conditions. A few of them are based on imperfect capital market.
MacDougall-Kemp Hypothesis: Assuming a two-country model- one being the investing and other being the host country and the price of capital being equal, the investment flows from abundant economy to a capital scare economy until the marginal productivity of capital in both the countries are equal or till the returns from investment is greater than the loss of output in home country.
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