Capital Flows and the Behavior of Emerging Market Equity Returns

Fuqua School of Business Working Paper No. 9807

51 Pages Posted: 8 May 2000

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 1999

Abstract

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.

Keywords: Capital Markets, U.S. Equity Flows, Distribution of Equity Returns, Economic Growth

JEL Classification: F30, F15, G15. G12

Suggested Citation

Bekaert, Geert and Harvey, Campbell R., Capital Flows and the Behavior of Emerging Market Equity Returns (May 20, 1999). Fuqua School of Business Working Paper No. 9807. Available at SSRN: https://ssrn.com/abstract=103120 or http://dx.doi.org/10.2139/ssrn.103120

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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