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The Risky Capital of Emerging Markets

Joel David (), Espen Henriksen and Ina Simonovska ()

No 20769, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use macroeconomic data to build a panel of international capital returns over a long horizon across both developed and developing countries. We document two facts: poor and emerging markets exhibit (1) high average returns to capital and (2) high betas on US returns. We quantitatively explore whether consumption-based risk faced by a US investor can reconcile these patterns. Long-run risks lead to return disparities at least 55% as large as those in the data. Fact (2), although not a sufficient statistic, is informative about the extent of long-run risk in foreign capital, and so about fact (1).

JEL-codes: E22 F21 G12 O4 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-mac and nep-opm
Note: AP DEV EFG IFM ITI PR
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Working Paper: The Risky Capital of Emerging Markets (2016) Downloads
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