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International fund investment and local market returns

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

Abstract

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.

Suggested Citation

  • Jinjarak, Yothin & Wongswan, Jon & Zheng, Huanhuan, 2011. "International fund investment and local market returns," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 572-587, March.
    • Handle: RePEc:eee:jbfina:v:35:y:2011:i:3:p:572-587
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    6. Alejandro Jara & Eduardo Olaberría, 2013. "Are all Capital Inflows Associated with Booms in House Prices? An Empirical Evaluation," Working Papers Central Bank of Chile 696, Central Bank of Chile.
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    8. Ros Zam Zam Sapian & Jing Quan Lee, 2018. "Return, Volatility and Equity Fund Flows Linkages: Evidence from an Emerging Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(7), pages 172-186, July.
    9. Ülkü, Numan & Weber, Enzo, 2013. "Identifying the interaction between stock market returns and trading flows of investor types: Looking into the day using daily data," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2733-2749.
    10. Ros Zam Zam Sapian & Noor Azryani Auzairy, 2015. "Foreign Equity Flows and Market Return Linkages: Evidence of Malaysian Stock Market," Global Business Review, International Management Institute, vol. 16(5_suppl), pages 1-14, October.
    11. Andreou, Christoforos K. & Lambertides, Neophytos & Savvides, Andreas, 2020. "Sovereign credit risk and global equity fund returns in emerging markets," Journal of International Money and Finance, Elsevier, vol. 107(C).
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    16. Tim A Kroencke & Maik Schmeling & Andreas Schrimpf, 2015. "Global Asset Allocation Shifts," BIS Working Papers 497, Bank for International Settlements.
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    22. Eric Fischer, 2020. "Monetary Surprises and Global Financial Flows: A Case Study of Latin America," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(2), pages 189-225, August.
    23. Andrikopoulos, Athanasios & Chen, Zhongfei & Chortareas, Georgios & Li, Kexin, 2023. "Global economic policy Uncertainty, gross capital Inflows, and the mitigating role of Macroprudential policies," Journal of International Money and Finance, Elsevier, vol. 131(C).
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