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Transparency and International Investor Behavior

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  • Shang-Jin Wei
  • Gaston Gelos

Abstract

Does country "transparency" affect international portfolio investment? We examine this and related questions using a unique micro dataset on international portfolio holdings. We employ various indices of government and corporate transparency, focusing on the availability and quality of information. We find that emerging market equity funds hold fewer assets in less transparent countries. Herding among funds is somewhat less prevalent in more transparent countries. During the Asian and Russian crises, emerging market funds withdrew more strongly from less transparent countries after controlling for other risk factors. However, funds tend to react less strongly to news from more opaque markets.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/174.

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Length: 39
Date of creation: 01 Oct 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/174

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Keywords: Emerging markets; investors; asian crisis; accounting standards; international investors; contagion; cost of capital; financial crises; macroeconomic policies; international finance; expected returns; institutional investors; currency crises; competitiveness; minority shareholders; expected value; foreign investors; foreign equities; banking crises; financial crisis; financial contagion; shareholders ? rights; investment analysis; investor protection; mutual funds; information asymmetry; investment behavior; total market capitalization; financial information; contract enforcement; risk assessment; likelihood of financial crises; ownership structure; crony capitalism; banking crisis; offshore investment; crisis probabilities; insider dealing; currency depreciation; asian financial crisis; expropriation; global capital; legal systems;

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