  A technique from stochastic portfolio theory [Fernholz, 1998] is applied to
analyse equity returns of Small, Mid and Large cap portfolios in an emerging
market through periods of growth and regional crises, up to the onset of the
global financial crisis. In particular, we factorize portfolios in the South
African market in terms of distribution of capital, change of stock ranks in
portfolios, and the effect due to dividends for the period Nov 1994 to May
2007. We discuss the results in the context of broader economic thinking to
consider capital flows as risk factors, turning around more established
approaches which use macroeconomic and socio-economic conditions to explain
Foreign Direct Investment (into the economy) and Net Portfolio Investment (into
equity and bond markets).
