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This paper exploits a novel dataset covering the universe of transactions in the Colombian Stock Exchange to analyze episodes of additions to and deletions from MSCI equity indexes. The analysis finds that additions and deletions have large price effects: the median cumulative abnormal return in absolute value is 5.5 percent. The paper shows that these price effects are due to large demand shocks by different classes of international investors-not only passive funds and ETFs, but also active mutual funds, pension funds and government funds-which are not absorbed by arbitrageurs. Consistent with recent asset pricing models with limits to arbitrage, stock demand curves are estimated to be very inelastic: the demand elasticity for the median stock in the sample is ?0.34, implying that a 1 percent increase in the demand for the stock increases its price by 2.9 percent.

Arbitrage --- Capital Markets and Capital Flows --- Demand Elasticity --- Finance and Financial Sector Development --- Financial Regulation and Supervision --- Index Rebalancing --- Institutional Investor --- Mutual Funds --- Non Bank Financial Institutions --- Passive Fund --- Securities Markets Policy and Regulation --- Stock Market Index

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This paper examines the determinants of stock markets' vulnerability to the 2007-2008 crisis. Given that the United States (US) was the crisis epicenter, the authors analyze the factors driving the co-movement between US returns and stock returns in 83 countries. The analysis distinguishes between the period before and after the collapse of Lehman Brothers. The findings indicate that the main channel of transmission was financial. There is also evidence of a "wake-up call" or "demonstration effect" in the first stage of the crisis, because countries with vulnerable banking and corporate sectors exhibited higher co-movement with the US market. However, despite a collapse in trade across countries, the analysis does not find support for this channel of transmission.

Asset values --- Banking assets --- Capital flows --- Debt Markets --- Developing countries --- Economic Theory & Research --- Emerging Markets --- Emerging markets --- Equity holdings --- Finance and Financial Sector Development --- Financial crisis --- Financial institutions --- Financial markets --- Housing finance --- International bank --- Macroeconomics and Economic Growth --- Market data --- Market returns --- Markets and Market Access --- Mutual Funds --- Private Sector Development --- Residential mortgages --- Returns --- Stock market --- Stock market index --- Stock markets --- Stock returns --- Total debt

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Fiscal crises and sovereign default repeatedly threaten the stability and growth of economies around the world. Mark Aguiar and Manuel Amador provide a unified and tractable theoretical framework that elucidates the key economics behind sovereign debt markets, shedding light on the frictions and inefficiencies that prevent the smooth functioning of these markets, and proposing sensible approaches to sovereign debt management. 'The Economics of Sovereign Debt and Default' looks at the core friction unique to sovereign debt - the lack of strong legal enforcement - and goes on to examine additional frictions such as deadweight costs of default, vulnerability to runs, the incentive to 'dilute' existing creditors, and sovereign debt's distortion of investment and growth.

BUSINESS & ECONOMICS / Economics / Macroeconomics. --- Debts, External. --- Debts, Foreign --- Debts, International --- External debts --- Foreign debts --- International debts --- Debt --- International finance --- Investments, Foreign --- Debts, Public. --- Default (Finance) --- Finance --- Finance, Public --- Repudiation --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Bonds --- Deficit financing --- 1997 Asian financial crisis. --- Auction. --- Balance of trade. --- Bank rate. --- Bond (finance). --- Bond market. --- Capital market. --- Capitalism. --- Central bank. --- Competition (economics). --- Consumer price index. --- Consumption (economics). --- Convergence (economics). --- Coordination failure (economics). --- Cost of capital. --- Credit (finance). --- Credit default swap. --- Credit risk. --- Creditor. --- Currency. --- Debt Issue. --- Debt crisis. --- Debt limit. --- Debt overhang. --- Debt ratio. --- Debt. --- Default (finance). --- Economic equilibrium. --- Economic liberalization. --- Economic planning. --- Economic policy. --- Economics. --- Economy. --- Equity Market. --- Equity ratio. --- European debt crisis. --- Eurozone. --- Exchange rate. --- External debt. --- Finance. --- Financial Account. --- Financial Times. --- Financial crisis of 2007–08. --- Financial crisis. --- Financial engineering. --- Financial fragility. --- Fiscal policy. --- Foreign Exchange Reserves. --- Foreign direct investment. --- Government bond. --- Government budget balance. --- Government budget. --- Government debt. --- Haircut (finance). --- Hedge (finance). --- Hedge fund. --- High-yield debt. --- Incremental capital-output ratio. --- Inflation. --- Institutional investor. --- Insurance. --- Interest rate. --- International Monetary Fund. --- Investment goods. --- Investment. --- Macroeconomics. --- Market economy. --- Market liquidity. --- Market mechanism. --- Market price. --- Market value. --- Money management. --- Money market. --- Neoclassical economics. --- Net capital outflow. --- Net foreign assets. --- Payment. --- Political economy. --- Price Change. --- Probability of default. --- Profit (economics). --- Public finance. --- Real interest rate. --- Repayment. --- Return on capital. --- Revaluation of fixed assets. --- Risk premium. --- Risk-Return Tradeoff. --- Securitization. --- Stock market index. --- Stock market. --- Supply (economics). --- Swap (finance). --- Tax revenue. --- Trade credit. --- Trader (finance). --- Trading nation. --- United States Treasury security. --- World Bank. --- World economy.