Stocks for the Long Run? Evidence from Emerging Markets

60 Pages Posted: 4 May 2013

See all articles by Zaghum Umar

Zaghum Umar

Zayed University - College of Business; Netspar

Laura Spierdijk

University of Twente - Department of Behavioural, Management and Social Sciences - Financial Engineering section

Date Written: April 25, 2013

Abstract

We estimate the myopic (single-period) and intertemporal hedging (long-run) demand for stocks in 20 growth-leading emerging market economies and the US during the 1999-2012 period. We consider two types of emerging market investors: a domestic investor (whose returns are denominated in the local currency) and an international investor who can invest in US and emerging markets stocks (with returns in US dollars). We establish significant short-run and long-run domestic demand for stocks in several emerging market economies. For international investors only the short-run demand for emerging market stocks tends to be significant. Hence, only for domestic investors emerging market stocks are assets for the long run.

Keywords: Emerging market stocks, predictability, myopic demand, intertemporal hedging demand

JEL Classification: G11, G15

Suggested Citation

Umar, Zaghum and Spierdijk, Laura, Stocks for the Long Run? Evidence from Emerging Markets (April 25, 2013). Netspar Discussion Paper No. 04/2013-010, Available at SSRN: https://ssrn.com/abstract=2260196 or http://dx.doi.org/10.2139/ssrn.2260196

Zaghum Umar (Contact Author)

Zayed University - College of Business ( email )

P.O. Box 4783
Abu Dhabi
United Arab Emirates

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Laura Spierdijk

University of Twente - Department of Behavioural, Management and Social Sciences - Financial Engineering section ( email )

Hallenweg 17
Enschede, 7522NH
Netherlands

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