Modelling the Time Varying Determinants of Portfolio Flows to Emerging Markets

23 Pages Posted: 19 Oct 2011 Last revised: 26 Aug 2012

Multiple version iconThere are 2 versions of this paper

Date Written: August 23, 2012

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.

Keywords: capital flows, emerging markets, financial crisis, push factors, pull factors

JEL Classification: F32, F34, G01, G11

Suggested Citation

Lo Duca, Marco, Modelling the Time Varying Determinants of Portfolio Flows to Emerging Markets (August 23, 2012). Available at SSRN: https://ssrn.com/abstract=1945760 or http://dx.doi.org/10.2139/ssrn.1945760

Marco Lo Duca (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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