Stock returns and foreign investment in Brazil

Reis, Luciana and Meurer, Roberto and Da Silva, Sergio (2008): Stock returns and foreign investment in Brazil.

Abstract

We examine the relationship between stock returns and foreign investment in Brazil, and find that the inflows of foreign investment boosted the returns from 1995 to 2005. There was a strong contemporaneous correlation, although not Granger-causality. Foreign investment along with the exchange rate, the influence of the world stock markets, and country risk can explain 73 percent of the changes that occurred in the stock returns over the period. We also find that positive feedback trading played a role, and that the market promptly assimilated new information.

• Item Type: MPRA Paper
• Language: English
• Keywords: stock returns; foreign investment; Brazilian economy
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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