We examine whether international tourism affects financial market investments. Using data for more than 40 countries, we demonstrate that recreational travel between countries is associated with higher levels of foreign equity investments. Increased foreign investments lead to a reduction in home bias and improved diversification. The impact of tourism is stronger for countries that are farther apart or when home country residents are more risk averse. Using predictors of recreational travel as instruments, we show that the relation between foreign travel and foreign equity investments is causal. Collectively, these results suggest that tourism has positive externalities in financial markets.