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Uncertainty and international fund flows: A cross-country analysis

Author

Listed:
  • French, Joseph J.
  • Shin, Seungho
  • Gurdgiev, Constantin
  • Naka, Atsuyuki

Abstract

This paper investigates the impacts of uncertainty on international portfolio allocation decisions and returns across 27 countries. Using panel structural vector autoregressive analysis, a positive link between both country-level and global uncertainty with equity fund flows is uncovered, highlighting the role of investor sentiment in capital allocation decisions. Findings also support the portfolio rebalancing theory, revealing the negative influence of past returns on fund flows. Results show that the VIX demonstrates a positive association with fund flows, particularly during periods of elevated global uncertainty. Moreover, this research analyzes differences between developed and emerging markets in their sensitivity to uncertainty shocks.

Suggested Citation

  • French, Joseph J. & Shin, Seungho & Gurdgiev, Constantin & Naka, Atsuyuki, 2024. "Uncertainty and international fund flows: A cross-country analysis," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s105752192400214x
    DOI: 10.1016/j.irfa.2024.103282
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    More about this item

    Keywords

    Fund flows; Capital flows; Economic policy uncertainty; Geopolitical risk; Portfolio rebalancing theory;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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