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Foreign Capital Flow and the Ibovespa Performance

Author

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  • Roberto Meurer

    (Departamento de Economia, UFSC)

Abstract

In this paper it is discussed and empirically tested the influence of foreign investors flow of resources on the Ibovespa index of the Sao Paulo Stock Exchange from January 1995 to july 2005. Other important variables are considered in the test, including a stock index of the United States, internal and external interest rates, the markets liquidity, exchange rate and country risk. The foreign influence is measured by the difference between the purchases and sells of foreign investors in the market of their participation in the Brazlian market capitalization. The effect of the inflow of resources was not detected straightly, but through an increase of the liquidity, what is compatible with the hypothesis that the foreign investors represent an increase of the base of stockholders of the domestic companies. The inflow of resources, on the other hand, anticipates the behavior of index. Country risk, exchange rate and liquidity of the market were important to explain variations of the Ibovespa.

Suggested Citation

  • Roberto Meurer, 2006. "Foreign Capital Flow and the Ibovespa Performance," Brazilian Review of Finance, Brazilian Society of Finance, vol. 4(1), pages 79-95.
    • Handle: RePEc:brf:journl:v:4:y:2006:i:1:p:79-95
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    More about this item

    Keywords

    foreign portfolio investment; Brazil; Ibovespa; macroeconomic variables;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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