Financial panics and portfolio investment of international mutual funds

Research output: Contribution to journalArticle

Author(s)

Department/unit(s)

Publication details

JournalApplied Financial Economics
DateE-pub ahead of print - 3 Nov 2010
DatePublished (current) - 2010
Issue number23
Volume20
Number of pages12
Pages (from-to)1793-1805
Early online date3/11/10
Original languageEnglish

Abstract

This article studies equity investment of emerging-market funds based on the 2003–2009 weekly data and compares the dynamics of flow and return between tranquil period and financial panic based on the experience of the latest 2008–2009 global financial crisis. First, we find that the well-documented positive feedback trading is a tranquil-period phenomenon such that it is more difficult in general for emerging-market funds to attract new investment in financial panic. Second, the predictive power of flow on return is driven by a combination of price pressure and information effects in tranquil period, while the information effect dominates in financial panic. Third, the underlying co-movements or contagion of flow across the emerging-market funds influence the association between flow and return. Overall, the findings highlight the importance of accounting for state-dependent dynamics as well as cross-regional co-movements in the analysis of flow and return.

Discover related content

Find related publications, people, projects, datasets and more using interactive charts.

View graph of relations