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This paper investigates the dynamics of capital markets in emerging markets in a period of financial integration. It takes the case of Brazil and South Korea, two key emerging markets in the global economy, to assess the relationship between capital flows and equity prices. This is analysed through Jan Toporowski’s theory of “capital market inflati...
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... However, contrarian strategies might be suitable for trading the constituent stock of SSE 50 over the data period 2016 to 2019, which is similar to the strategies employed by the Korean stock market. Since numerous stocks have been included as constituents of the MSCI for decades, the Korean stock market should have a high percentage of institutional investors (Bonizzi 2015). Similarly, based on the weight raised by the MSCI, the Chinese stock market may have been dominated by more institutional investors after 2015. ...
Journal: Financial Innovation(SSCI)
The idea of this study is derived from observing the profitability of stock investment as the continuously rising (or falling) prices of stocks and the continuously overbought (or oversold) signals emitted by technical indicators. We employ the standard event-study approach and technical trading strategies to explore whether investors would exploit profits in trading the constituent stocks of Korea Composite Stock Price Index 50 (KOSPI 50) and Shanghai Stock Exchange 50 (SSE 50) when the continuous phenomena aforementioned occurred. We find that both Korean and Chinese stock markets are not fully efficient, which may enhance the robustness of the existing literature. Besides, we reveal that the contrarian strategies are appropriate for trading the stocks listed in the Korean stock market for all circumstances investigated in this study. However, the momentum strategies are proper for the Chinese stock market when continuously rising stock prices and overbought signals are shown together. These findings imply that the difference in investors’ behaviors between Korean and Chinese stock markets might result in dissimilar trading strategies employed in these two indices.
... En la literatura económica existe un consenso sobre el papel que puede desempeñar el mercado de capitales en el desarrollo económico. Sin embargo, se discute sobre las condiciones que deben cumplirse para que éste desarrolle su papel en el financiamiento del sector productivo (Keynes, 1936;Kalecki, 1954;Studart, 1995), cobrando fuerza este debate a raíz de la crisis de 2008 (Bonizzi, 2015;Manuelito y Jiménez, 2010). En particular, Keynes (1936) argumenta que el mercado de capitales, que incluye bonos y acciones, puede ser una fuente de financiamiento de largo plazo (i.e., fondeo), pero advierte sobre la inestabilidad que puede generar la especulación. ...
... En la literatura sobre la inflación del mercado de capitales se sostiene que los recursos de los fondos de pensiones generaron inflación en el precio de los activos financieros en Reino Unido (Toporowski, 2000). Asimismo, para economías emergentes y abiertas como Brasil y Corea, en el periodo de globalización, se encuentra que los flujos de inversión extranjera están en el origen de procesos de inflación en el precio de los activos financieros domésticos (Bonizzi, 2015). ...
... Las estimaciones econométricas del modelo ARDL muestran que los aumentos de los flujos de inversión extranjera provocan un aumento de la inflación en el precio de las acciones, lo que es consistente con los resultados de otros trabajos para Brasil y Corea (Bonizzi, 2015). ...
La hipótesis de este trabajo es que los flujos de capitales crean inflación en el mercado accionario mexicano, lo que se asocia a condiciones de inestabilidad que obstaculizan el financiamiento de la inversión productiva. Los resultados de un modelo de rezagos distribuidos (ARDL) para el periodo 2009-2019 indican que la inversión extranjera de renta variable crea inflación en el precio de las acciones. En cambio, los flujos de recursos de los fondos para el retiro se relacionan de manera negativa, funcionando como amortiguadores ante la salida de flujos de inversión extranjera, debido a una estrategia de inversión de largo plazo. Estos resultados constituyen evidencia para abrir una línea de investigación sobre el diseño de políticas financieras que potencien el papel de los fondos para el retiro en el financiamiento de largo plazo del sector productivo.
... Participation in financial globalisation is specific to a few countries in these developing regions, and their respective gross capital inflow and outflow. Analyses of this process should break away from an examination based on regions or income groups and focus on these countries (see Bonizzi, 2015). ...
This paper examines the increasing cross-border flows of capital involving developing and emerging economies in the past few decades. The discussion challenges the traditional economic theories based on net capital flows and deficits in current accounts to explain international borrowing by developing countries, and on the current account imbalances approach to explain financial crises. We argue that the increasing involvement of the private sector in developing countries' external debt and the fact that the public sector, previously reliant almost entirely on official credit, has become able to access private debt markets, reflect the increasing integration of developing countries into the global financial system, and this process has particular features. A closer look at data on gross capital flows reveals that net capital flows neither explain nor capture this global financial integration.
... According to the Morgan Stanley Capital International (MSCI) Emerging Markets Indexes [5], China and South Korea are emerging markets in Asia [6][7][8]. From the 2016 edition of the European Union (EU) Industrial R&D Investment Scoreboard released by the Economics of Industrial Research and Innovation (IRI), we get to know that Chinese companies continued to show the best performance with regard to R&D growth (up by 24.7%), but also presented a significant decrease in net sales (−6.2%), and South Korean companies showed a more modest R&D growth and also a slight decrease in net (GDP). In 2015, China's State Council issued a 10-year national plan, Made in China 2025, aiming to transform China from a manufacturing giant into a world manufacturing power. ...
The issue concerning the increasing research and development (R & D) investment in emerging markets is especially attractive for many researchers and practitioners. This paper measures and compares the characteristics of Chinese and South Korean R & D expenditures of manufacturing companies from 2012 to 2016. It also examines the impact of R & D investment on firm performance. The results show that debt maturity and cash reserves are positive determinants of R & D investment in China and South Korea. Firm size, internal financing, and debt ratio are restrictive factors of R & D intensity in Chinese manufacturing companies, while debt ratio is the only negative determinant of R & D investment in their South Korean counterparts. The results also show that R & D intensity exhibits a strong positive impact on the performance of manufacturing companies in both countries. Moreover, this impact is stronger in South Korea than in China. In addition, R & D investment has a positive time-lag effect only on the performance of Chinese manufacturing companies. Our study presents some new evidence for the relationship between R & D intensity and firm performance in emerging markets.
... Recent work by the Bank of England (Haldane 2011, 2014), the IMF (2011, 2014, and the Bank for International Settlements (BIS 2011;Miyajima and Shim 2014), among others, confirm that understanding institutional investors' portfolio choices is vital in addressing important global financial stability issues, including the movements of capital flows to emerging markets. This view is generally shared by authors working in the post-Keynesian and institutionalist traditions who argue that institutional investors have become prominent actors in financial markets -including in emerging markets -not always with positive consequences (Bonizzi 2015;Frenkel and Menkhoff 2004;Harmes 2001;Liang 2011;Menkhoff 2002). As Figure 5 illustrates, allocations to emerging-market bonds and equities by institutional investors have grown substantially. ...
This article contributes to the establishment of a framework for the analysis of international capital flows, with a specific focus on emerging markets. It is based on a “monetary” analysis of the economy, as well as on the works of Hyman Minsky and Jan Toporowski in particular. The key aspects of such an approach are the following. First, in a monetary economy, capital flows need to be understood as “flows of funds” that pertain to the realm of financial choices, as opposed to the traditional understanding of capital flows as based on “real” variables, such as saving and investment. A consequence of this is the need to focus on gross flows rather than capital flows. Second, liquidity preference considerations also apply at the international level, particularly in relation to the liquidity of emerging-market currencies that, in turn, depends on context-specific “Keynesian fundamentals.” Third, the rise of institutional investors is the key historical development in the financial system, shaping the current reality of cross-border capital flows, including to emerging markets. I argue that institutional investors’ liabilities, in light of the theories of Minsky and Toporowski, are one of the most important variables in determining these investors’ portfolio choices. I synthesize these elements by defining capital flows to emerging markets as the demand for emerging-market assets by institutional investors. I propose a framework to categorize the various channels that guide this demand.
Global financial integration causes the economic consequences of economic crises, wars, or pandemics to be felt more in developing countries and triggers high exchange rate volatilities in these economies. In such an integrated financial environment, it is an interesting research domain how and why the exchange rate volatilities of countries are not affected similarly but tend to diverge from each other. This study investigates whether the exchange rate volatilities of fragile market economies converge in the stochastic convergence framework. To answer this question, we analyzed the stochastic behavior of the series using the traditional and structural break unit root tests besides RALS unit root tests, which consider the information of non-normal errors. The discussions regarding the size and power properties of test procedures in the unit root testing literature have formed a crucial part of the implications of the test results. In light of these discussions, we conclude that the stochastic convergence assumption is valid for Brazil, South Africa, India, and Hungary, whereas it is not valid for Argentina, Mexico, and Türkiye. The policy implications of our findings are that fragile market economies have different fragility levels among themselves and countries with high fragility levels show higher volatility than others.
This paper investigates the portfolio diversification possibilities between BRICS and the US stock market. Using bootstrap full-sample Granger causality and bootstrap rolling-window sub-sample Granger causality tests, we did not find evidence supporting the causal linkage between BRICS and the US stock markets; time-varying causality was observed for particular sub-samples. Our findings imply that BRICS stock markets can provide diversification possibilities for US investors most of the time; however, such opportunities become extremely limited during crisis periods. We also find that stock markets are more likely to be causally linked if they have similar business conditions, excess returns and size premiums.
The paper argues that wage dispersion between white-collar and blue-collar workers has caused the rise and expansion of pension funds in a direct and long-run structural manner in the USA. Using data from the Saez-Zucman and the St. Louis Fed’s FRED datasets, the argument is empirically analysed on yearly data for the period 1964-2012 in the USA. The results confirm the existence of a long-run relationship of causality from wage dispersion to the share of pension funds within US households’ financial wealth. Applying a vector error correction model to the data it emerges that the variance in pension funds due to wage dispersion starts to rise after the fifth period, and reaches 69% in the tenth period.
