Have drivers of portfolio capital flows changed since the Global Financial Crisis?

The Global Financial Crisis had a substantial impact on the size and composition of portfolio capital flows, which raises the question whether the factors driving these capital flows have changed. The literature is scarce and shows mixed results, which may be attributable to the time windows used to compare the periods before and especially after the crisis. I identify and compare robust drivers of portfolio capital inflows for 75 countries in two non-overlapping periods (1996–2007 and 2011–19) using the Bayesian Model Averaging method. I find that the drivers have changed since the crisis. Bond investors in advanced and emerging economies have become more prudent, while investors in emerging market equity search for return. After the crisis, the more advanced economies continue to capture more portfolio inflows, which confirms the Lucas paradox, and is driven by institutions rather than capital openness.