Financial markets and international risk sharing in emerging market economics

Martin Schmitz

No 1451, Working Paper Series from European Central Bank

Abstract: In light of rapidly increasing foreign equity liability positions of emerging market economies, we test for a necessary condition of international risk sharing, namely for systematic patterns between idiosyncratic output fluctuations and financial market developments. Panel analysis of 22 emerging market economies shows strong evidence for pro-cyclicality of capital gains on domestic stock markets both over short and medium term horizons. This implies that domestic output fluctuations can be hedged through cross-border ownership of financial markets. JEL Classification: F21, F30, G15

Keywords: capital gains; Cross-Border Investment; emerging market economies; financial globalisation; International risk sharing (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-ifn and nep-opm
Note: 1865580
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: FINANCIAL MARKETS AND INTERNATIONAL RISK SHARING IN EMERGING MARKET ECONOMIES (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121451

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