Financial, Institutional and Macroeconomic Determinants of Cross-Country Portfolio Equity Flows
REM Working Paper 0235-2022
41 Pages Posted: 8 Aug 2022
There are 2 versions of this paper
Financial, Institutional and Macroeconomic Determinants of Cross-Country Portfolio Equity Flows
Financial, Institutional, and Macroeconomic Determinants of Cross-Country Portfolio Equity Flows
Date Written: July 30, 2022
Abstract
We consider a new dataset that provides a description of the population of financial equity flows between developed countries from 2001 to 2018. We follow the standard practice of controlling for pull and push factors as well as gravity-style variables, while also accounting for the business cycle, public debt and sovereign ratings. Our key findings are as follows: (i) equity flows are more intense between countries at the same stage of the business cycle (ii) increased equity flows to countries with a relatively lower public debt deficit as a ratio of GDP (iii) financial and macroeconomic variables are mportant for big equity flows, while institutional variables are important for the small flows. Overall, this new dataset provides novel evidence on the importance of the business cycle, government debt and sovereign ratings scores.
Keywords: Cross-country equity flows, stock market returns, panel data, quantile regression, business cycle
JEL Classification: C23, E44, F44, G15
Suggested Citation: Suggested Citation