Dollar-weighted return on aggregate corporate sector: How is it distributed across countries?

Abstract

This paper computes the dollar-weighted returns (DWRs) on the aggregate corporate sector in each of 43 sample countries. The paper shows that the DWRs in U.S. dollars are similar across countries but the local-currency DWRs are not. Further analysis shows that the DWRs in local currency are higher in financially closed countries but their currencies lose value, thereby resulting in the parity of DWRs in U.S. dollars across countries. More generally, a country's DWR converges faster to the global benchmark, the more financially open the country is. Taken together, our results are consistent with the notion that capital flows in such a way that the return to investors is equalized across countries and any barriers to cross-border capital flows are overcome by currency value changes.