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Modelling the time varying determinants of portfolio flows to emerging markets

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  • Lo Duca, Marco

Abstract

This paper studies how the drivers of portfolio flows change across periods with a model where regression coefficients endogenously change over time in a continuous fashion. The empirical analysis of daily equity portfolio flows to emerging markets shows that the regression coefficients display substantial time variation. Major changes in the importance of the drivers of the flows coincide with important market events/shocks. Overall, investors pay more attention to regional developments in emerging markets in periods when market tensions are elevated. However, extreme tensions generate panics, i.e. periods when changes in uncertainty and risk aversion drive flows, while regional developments play only a marginal role. JEL Classification: F32, F34, G01, G11

Suggested Citation

  • Lo Duca, Marco, 2012. "Modelling the time varying determinants of portfolio flows to emerging markets," Working Paper Series 1468, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20121468
    Note: 452517
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    More about this item

    Keywords

    capital flows; emerging markets; financial crisis; pull factors; push factors;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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