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Daily Cross-Border Equity Flows: Pushed or Pulled?

  • John M. Griffin
  • Federico Nardari
  • Rene M. Stulz

In a model that is consistent with the existence of a home bias and with foreign investors that are less informed than domestic investors, we show that unexpectedly high worldwide returns lead to net equity inflows into small countries. In addition, a small country experiences net equity inflows when its stocks earn unexpectedly high returns. 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 our empirical analysis show that global stock return performance is an important factor in understanding equity flows.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9000.

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Date of creation: Jun 2002
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Publication status: published as Nardari, Federico, John Griffin, and Rene M. Stulz. "Daily Cross-Border Flows: Pushed or Pulled?" Review of Economics and Statistics 86, 3 (2004): 641-657.
Handle: RePEc:nbr:nberwo:9000
Note: AP
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