Agosin, Manuel; Huaita, Franklin - Departamento de Economía, Facultad de Economía y Negocios - 2009
This paper applies the overreaction hypothesis of De Bondt and Thaler (1985), developed for stock price behaviour, to capital flows to emerging markets. We find that a surge in capital flows, or what we call a capital boom, can predict future sharp contractions in capital flows, or sudden stops....