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Stock returns and foreign investment in Brazil

  • Reis, Luciana
  • Meurer, Roberto
  • Da Silva, Sergio

We examine the relationship between stock returns and foreign investment in Brazil, and find that the inflows of foreign investment boosted the returns from 1995 to 2005. There was a strong contemporaneous correlation, although not Granger-causality. Foreign investment along with the exchange rate, the influence of the world stock markets, and country risk can explain 73 percent of the changes that occurred in the stock returns over the period. We also find that positive feedback trading played a role, and that the market promptly assimilated new information.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23028.

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Date of creation: 2008
Date of revision:
Handle: RePEc:pra:mprapa:23028
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  1. Newton, Da Costa Jr & Carlos, Mineto & Sergio, Da Silva, 2006. "Disposition effect and gender," MPRA Paper 1848, University Library of Munich, Germany.
  2. Benjamin Miranda Tabak, 2003. "The random walk hypothesis and the behaviour of foreign capital portfolio flows: the Brazilian stock market case," Applied Financial Economics, Taylor & Francis Journals, vol. 13(5), pages 369-378.
  3. repec:ebl:ecbull:v:6:y:2005:i:10:p:1-17 is not listed on IDEAS
  4. Liam Gallagher, 2000. "Macroeconomic shocks under alternative exchange rate regimes: the Irish experience," Applied Economics, Taylor & Francis Journals, vol. 32(7), pages 933-944.
  5. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  6. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005. "Does financial liberalization spur growth?," Journal of Financial Economics, Elsevier, vol. 77(1), pages 3-55, July.
  7. Sergio Da Silva & Guilherme Moura, 2005. "Is There a Brazilian J-Curve?," Economics Bulletin, AccessEcon, vol. 6(10), pages 1-17.
  8. Juncal Cunado Eizaguirre & Javier Gomez Biscarri & Fernando Perez de Gracia Hidalgo, 2009. "Financial liberalization, stock market volatility and outliers in emerging economies," Applied Financial Economics, Taylor & Francis Journals, vol. 19(10), pages 809-823.
  9. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04.
  10. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
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