Capital Flows and the Behavior of Emerging Market Equity Returns
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)
Campbell R. Harvey
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
May 20, 1999
Fuqua School of Business Working Paper No. 9807
Foreign portfolio flows may reflect deep changes in the functioning of an emerging market economy and its capital markets. Using a database of monthly net U.S. equity flows, we investigate the relation of these flows to the behavior of equity returns, the structural characteristics of the capital markets, exchange rates, and the strength of the economy. We find that increases in equity flows are associated with a lower cost of capital, higher correlation with world market returns, lower asset concentration, lower inflation, larger market size relative to GDP, more trade and slightly higher per capita economic growth.
Number of Pages in PDF File: 51
Keywords: Capital Markets, U.S. Equity Flows, Distribution of Equity Returns, Economic Growth
JEL Classification: F30, F15, G15. G12working papers series
Date posted: May 8, 2000
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