ECB paper analyses risk-sharing in emerging markets

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A working paper, published by the European Central Bank on July 11, studies the pro-cyclicality of capital gains in domestic equity markets, and suggests ways to reduce this effect.

The author, Martin Schmitz, analyses the co-movement of GDP and domestic capital gains in 22 emerging markets over the period 1996–2010, finding "strong evidence" of the pro-cyclicality of stock market movements. The researcher argues that countries can share this risk through foreign investment, reducing the

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