NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Daily Cross-Border Equity Flows: Pushed or Pulled?

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

NBER Working Paper No. 9000
Issued in June 2002
NBER Program(s):   AP

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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Document Object Identifier (DOI): 10.3386/w9000

Published: 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.

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