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International fund investment and local market returns

  • Jinjarak, Yothin
  • Wongswan, Jon
  • Zheng, Huanhuan

International fund investment in bonds and equities is characterized by a positive association between current net inflows and contemporaneous and past market returns: positive-feedback trading, while being possibly profitable for international fund investors, could be destabilizing for the underlying markets. Allowing for interactions between equity investment and bond investment, our panel vector autoregression shows that past equity returns contain useful information in forecasting equity and bond flows and that bond flows impact future equity returns positively.

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File URL: http://www.sciencedirect.com/science/article/B6VCY-4YV82KK-1/2/2e23f1dc860997234c360c9c029b8f92
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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 3 (March)
Pages: 572-587

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:3:p:572-587
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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