Abstract
This article examines the US equity flows to emerging stock markets from 1978 to 1991 and draws three main conclusions. First, despite the recent increase in US equity investment in emerging stock markets, the US portfolio remains strongly biased toward domestic equities. Second, of the fraction of the US portfolio that is allocated to foreign equity investment, the share invested in emerging stock markets is roughly proportional to the share of the emerging stock markets in the global market capitalization value. Third, the volatility of US transactions in emerging-market equities is higher than in other foreign equities. The normalized volatility of US transactions appears to be falling over time, however, and the authors find no relation between the volume of US transactions in foreign equity and local turnover rates or volatility of stock returns.
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