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Institutional Investors and Asset Pricing in Emerging Markets

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  • Elaine Karen Buckberg
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    Abstract

    This paper presents a new theory of asset pricing intended to address why other developing country equity markets responded so strongly to the Mexican devaluation, while the world’s major stock markets were unmoved. This phenomenon can be explained if investors follow a two-step portfolio allocation process, first determining what share of their portfolio to invest in developing countries, then allocating those funds across the emerging markets. For 12 of 13 markets studied, the one-factor CAPM is rejected in favor of a two-factor asset pricing model, including both a broad emerging markets portfolio and the global market portfolio.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 96/2.

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    Length: 25
    Date of creation: 01 Jan 1996
    Date of revision:
    Handle: RePEc:imf:imfwpa:96/2

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    Cited by:
    1. Pami Dua & Reetika Garg, 2013. "Foreign Portfolio Investment Flows To India -- Determinants And Analysis," Working papers 225, Centre for Development Economics, Delhi School of Economics.
    2. Van Rijckeghem, Caroline & Weder, Beatrice, 1999. "Financial contagion: Spillovers through banking centers," CFS Working Paper Series 1999/17, Center for Financial Studies (CFS).
    3. Pretorius, Elna, 2002. "Economic determinants of emerging stock market interdependence," Emerging Markets Review, Elsevier, vol. 3(1), pages 84-105, March.
    4. Poonam Gupta & James P. F. Gordon, 2003. "Portfolio Flows Into India," IMF Working Papers 03/20, International Monetary Fund.
    5. Christian Aubin & Jean-Pierre Berdot & Daniel Goyeau & Jacques Léonard, 2005. "Quelle convergence financière pour les pecos ?. Une analyse économétrique de l'évolution des marchés d'actions (1998-2003)," Revue économique, Presses de Sciences-Po, vol. 56(1), pages 147-169.

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