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Information flows during the Asian crisis: Evidence from closed-end funds

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  • Cohen, Benjamin H.
  • Remolona, Eli M.

Abstract

We test for the direction of information flow between US and Asian equity markets by comparing prices in Asian equity markets with prices of US-based closed-end funds that invest in those markets. Exploiting the fact that trading hours in the two regions do not overlap, we find that the day-to-day influence of local-market returns on the corresponding fund returns abroad was stronger before the crisis, while effects in the opposite direction rose somewhat during the crisis. This suggests that US market sentiment assumed a relatively more important role in driving Asian market developments during the crisis, while US investors were relatively less influenced by the views of Asian investors.

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  • Cohen, Benjamin H. & Remolona, Eli M., 2008. "Information flows during the Asian crisis: Evidence from closed-end funds," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 636-653, June.
  • Handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:636-653
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    Cited by:

    1. Jacob Gyntelberg & Alicia Garcia Herrero & Andrea Tesei, 2008. "The Asian crisis: what did local stock markets expect?," BIS Working Papers 261, Bank for International Settlements.
    2. R. G Gelos, 2011. "International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey," IMF Working Papers 11/92, International Monetary Fund.
    3. Jon Wongswan, 2006. "Transmission of Information across International Equity Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1157-1189.
    4. Amstad, Marlene & Remolona, Eli & Shek, Jimmy, 2016. "How do global investors differentiate between sovereign risks? The new normal versus the old," Journal of International Money and Finance, Elsevier, vol. 66(C), pages 32-48.
    5. Chang Shu & Dong He & Jinyue Dong & Honglin Wang, 2016. "Regional pull vs global push factors: China and US influence on Asia-Pacific financial markets," BIS Working Papers 579, Bank for International Settlements.
    6. Chayawadee Chai-Anant & Corinna Ho, 2008. "Understanding Asian equity flows, market returns and exchange rates," BIS Working Papers 245, Bank for International Settlements.
    7. Wu, Eliza & Erdem, Magdalena & Kalotychou, Elena & Remolona, Eli, 2016. "The anatomy of sovereign risk contagion," Journal of International Money and Finance, Elsevier, vol. 69(C), pages 264-286.
    8. Chan, Justin S.P. & Jain, Ravi & Xia, Yihong, 2008. "Market segmentation, liquidity spillover, and closed-end country fund discounts," Journal of Financial Markets, Elsevier, vol. 11(4), pages 377-399, November.
    9. Gochoco-Bautista, Maria Socorro & Remolona, Eli M., 2012. "Going Regional: How to Deepen ASEAN's Financial Markets," ADB Economics Working Paper Series 300, Asian Development Bank.
    10. Stylianos X. Koufadakis, 2016. "Mispricing Explanations of Closed-End Funds: A Survey Review," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(1-2), pages 108-135, January-J.

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