PATTERN OF EQUITY RETURNS IN EMERGING MARKETS: THE CASE OF COLOMBIA

Emerging capital markets provide important diversification opportunities for investors. In particular, portfolio investments increasingly flow to Latin American capital markets with the opening of these markets to foreign investors. This study examines the pattern of, Colombian stock returns, one of the most internationally active emerging capital markets, to see if investors can develop trading strategies and earn abnormal returns. Empirical analysis considers five Medellín Stock Exchange price indexes for three time periods centering on the opening of the economy. Statistically significant lower Wednesday returns are observed for the General, Industrial, and Selective indexes during the period corresponding to the opening of the Colombian economy. For the first time, general market and industry-specific indexes are analyzed simultaneously, allowing for the identification of abnormal returns in specific economic sectors.