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Information flows during the Asian crisis: Evidence from closed-end funds

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  • Cohen, Benjamin H.
  • Remolona, Eli M.

Abstract

We test for the direction of information flow between US and Asian equity markets by comparing prices in Asian equity markets with prices of US-based closed-end funds that invest in those markets. Exploiting the fact that trading hours in the two regions do not overlap, we find that the day-to-day influence of local-market returns on the corresponding fund returns abroad was stronger before the crisis, while effects in the opposite direction rose somewhat during the crisis. This suggests that US market sentiment assumed a relatively more important role in driving Asian market developments during the crisis, while US investors were relatively less influenced by the views of Asian investors.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 4 (June)
Pages: 636-653

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:636-653

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Web page: http://www.elsevier.com/locate/inca/30443

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  1. Jeffrey Frankel & Sergio Schmukler, 1996. "Country fund discounts and the mexican crisis of December 1994: Did local residents turn pessimistic before international investors?," Open Economies Review, Springer, vol. 7(1), pages 511-534, March.
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  9. Ramon Moreno & Gloria Pasadilla & Eli Remolona, 1998. "Asia's financial crisis: lessons and policy responses," Pacific Basin Working Paper Series 98-02, Federal Reserve Bank of San Francisco.
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  11. Charles Frederick Kramer & T. Todd Smith, 1995. "Recent Turmoil in Emerging Markets and the Behavior of Country-Fund Discounts: Renewing the Puzzle of the Pricing of Closed-End Mutual Funds," IMF Working Papers 95/68, International Monetary Fund.
  12. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
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Cited by:
  1. Chan, Justin S.P. & Jain, Ravi & Xia, Yihong, 2008. "Market segmentation, liquidity spillover, and closed-end country fund discounts," Journal of Financial Markets, Elsevier, vol. 11(4), pages 377-399, November.
  2. Jacob Gyntelberg & Alicia Garcia Herrero & Andrea Tesei, 2008. "The Asian crisis: what did local stock markets expect?," BIS Working Papers 261, Bank for International Settlements.
  3. Gaston Gelos, 2011. "International Mutual Funds, Capital Flow Volatility, and Contagion-A Survey," IMF Working Papers 11/92, International Monetary Fund.
  4. Jon Wongswan, 2003. "Transmission of information across international equity markets," International Finance Discussion Papers 759, Board of Governors of the Federal Reserve System (U.S.).
  5. Chayawadee Chai-Anant & Corinna Ho, 2008. "Understanding Asian equity flows, market returns and exchange rates," BIS Working Papers 245, Bank for International Settlements.

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