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International fund investment and local market returns

Author Info

  • 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.

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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

Keywords: Asset returns Bonds and equities Capital flows Institutional investors Global integration;

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Cited by:

  1. Broto, Carmen & Díaz-Cassou, Javier & Erce, Aitor, 2011. "Measuring and explaining the volatility of capital flows to emerging countries," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1941-1953, August.
  2. 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.
  3. 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.
  4. Chang, Chia-Lin & Ke, Yu-Pei, 2014. "Testing Price Pressure, Information, Feedback Trading, and Smoothing Effects for Energy Exchange Traded Funds," MPRA Paper 57625, University Library of Munich, Germany.
  5. repec:bor:wpaper:1308 is not listed on IDEAS
  6. Evren Arik & Elif Mutlu, 2014. "Global Risk Aversion, the Benchmark Index and the Foreign Investors: The case of Borsa Istanbul," Working Paper 08, Research and Business Development Department, Borsa Istanbul.
  7. Ülkü, Numan & Karpova, Yekaterina, 2014. "Do international equity investors rebalance to manage currency exposure? A study of Greece foreign investor flows data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 150-169.

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