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
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)
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Working Paper: The Risky Capital of Emerging Markets (2016)
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