Institutional Investors and Asset Pricing in Emerging Markets

January 1, 1996

Preview Citation

Format: Chicago

Elaine Karen Buckberg. Institutional Investors and Asset Pricing in Emerging Markets, (USA: International Monetary Fund, 1996) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a new theory of asset pricing intended to address why other developing country equity markets responded so strongly to the Mexican devaluation, while the world’s major stock markets were unmoved. This phenomenon can be explained if investors follow a two-step portfolio allocation process, first determining what share of their portfolio to invest in developing countries, then allocating those funds across the emerging markets. For 12 of 13 markets studied, the one-factor CAPM is rejected in favor of a two-factor asset pricing model, including both a broad emerging markets portfolio and the global market portfolio.

Subject: Asset allocation, Asset and liability management, Asset prices, Emerging and frontier financial markets, Financial institutions, Financial markets, Prices, Stock markets, Stocks

Keywords: Asia and Pacific, Asset allocation, Asset prices, Composite index, Developing country equities, Developing country market portfolio, Emerging and frontier financial markets, Global, Institutional investor, Latin America portfolio return, Portfolio, Stock markets, Stock portfolio, Stocks, World portfolio, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/002
Stock No:

WPIEA0021996
ISBN:

9781451841718
ISSN:

1018-5941

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