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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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File URL: https://mpra.ub.uni-muenchen.de/23028/1/MPRA_paper_23028.pdf
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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
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Handle: RePEc:pra:mprapa:23028
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  1. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Universite de Montreal, Departement de sciences economiques.
  2. 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.
  3. 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.
  4. Guilherme Moura & Sergio Da Silva, 2005. "Is There a Brazilian J-Curve?," International Finance 0505001, EconWPA.
  5. 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.
  6. Benjamin Miranda Tabak, 2002. "The Random Walk Hypothesis and the Behavior of Foreign Capital Portfolio Flows: the Brazilian Stock Market Case," Working Papers Series 58, Central Bank of Brazil, Research Department.
  7. 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.
  8. Liam Gallagher, 2000. "Macroeconomic shocks under alternative exchange rate regimes: the Irish experience," Applied Economics, Taylor & Francis Journals, vol. 32(7), pages 933-944.
  9. repec:ebl:ecbull:v:6:y:2005:i:10:p:1-17 is not listed on IDEAS
  10. Newton Da Costa & Carlos Mineto & Sergio Da Silva, 2008. "Disposition effect and gender," Applied Economics Letters, Taylor & Francis Journals, vol. 15(6), pages 411-416.
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