This dissertation investigates the behavior of gross international capital flows. It is divided into three chapters. In the first chapter, basic stylized facts about gross international flows are presented and broadly related to existing theories of international capital flows. In chapter two I construct a fully optimizing rational expectations model of gross flows. The key element of the model is information asymmetry within the group of foreign investors. The empirical evidence supports the model. Finally, the impact of gross flows on the volatility of local stock markets is investigated. I find that in developed countries, foreign trading has no impact on volatility once I control for total trading. However, even controlling for total trading, the effect of foreign trading in developing countries is significant.
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