The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is

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The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is the expected return on these assets relative to one another. Investors will demand more of the assets that offer higher expected returns and less of the assets that offer lower expected returns. Trade and capital flows, liquidity, and riskiness are also important factors, but they are usually considered alongside the expected return in determining the overall attractiveness of an asset.

The Theory of Asset Demand Suggests That the Most Important