Are Daily Cross-Border Equity Flows Pushed or Pulled?

Posted: 27 Dec 2011

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Federico Nardari

University of Melbourne - Department of Finance

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Abstract

We investigate the conditions under which an equilibrium intertemporal model based on portfolio decisions of investors can explain the dynamics of high frequency equity flows. Our model shows that, when there are barriers to international investment and when the expectations of foreign investors are more extrapolative than those of domestic investors (either due to foreigners being less informed or to behavioural reasons), unexpectedly high worldwide or local stock returns lead to net equity inflows in small countries. We investigate these predictions using daily data on net equity flows for nine emerging market countries and find that equity flows are positively related to host country stock returns as well as market performance abroad. Both our theoretical model and out empirical analysis show that global stock return performance is an important factor in understanding equity flows.

Suggested Citation

Griffin, John M. and Stulz, Rene M. and Nardari, Federico, Are Daily Cross-Border Equity Flows Pushed or Pulled?. Review of Economics and Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=473801

John M. Griffin (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
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HOME PAGE: http://www.jgriffin.info

Rene M. Stulz

Ohio State University (OSU) - Department of Finance ( email )

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Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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Federico Nardari

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

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