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Rational Contagion and the Globalization of Securities Markets

dc.contributor.authorCalvo, Guillermo A.
dc.contributor.authorMendoza, Enrique G.
dc.date.accessioned2007-02-16T18:42:00Z
dc.date.available2007-02-16T18:42:00Z
dc.date.issued2000-06
dc.identifier.citationCalvo, Guillermo A. and Enrique G. Mendoza, "Rational Contagion and the Globalization of Securities Markets," Journal of International Economics, Volume 51, Issue 1, June 2000, Pages 79-113.en
dc.identifier.urihttp://hdl.handle.net/1903/4291
dc.description.abstractThis paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios. In the presence of short-selling constraints, the gain of gathering information at a fixed cost may diminish as markets grow. Moreover, if a portfolio manager’s marginal cost for yielding below-market returns exceeds the marginal gain for above-market returns, there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows. Numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets.en
dc.format.extent313369 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_USen
dc.publisherElsevieren
dc.subjectHerd behavioren
dc.subjectcontagionen
dc.subjectcapital mobilityen
dc.subjectinternational portfolio diversificationen
dc.titleRational Contagion and the Globalization of Securities Marketsen
dc.typeArticleen
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtEconomics Departmenten_us
dc.relation.isAvailableAtCollege of Behavioral and Social Sciencesen_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, Md.)en_us
dc.rights.licenseJournal of International Economics: http://ees.elsevier.com/jie/en_us


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