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Does benchmark-driven investment amplify the impact of the global financial cycle on emerging markets?

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  • Chen, Yang
  • Feng, Yun
  • Liu, Qing
  • Zhang, Zhipeng

Abstract

This paper examines how the benchmark indexes affect the sensitivity of emerging markets cross-border fund flows to the global financial cycle. We find that benchmark-driven fund flows are more sensitive to the global financial cycle than non-benchmark-driven flows. The higher the penetration of benchmark-driven funds, the more fund flows are affected by global and domestic factors. Capital flow management policies can effectively dampen the impact of the global financial cycle on capital flows when the global financial cycle is at a low level.

Suggested Citation

  • Chen, Yang & Feng, Yun & Liu, Qing & Zhang, Zhipeng, 2025. "Does benchmark-driven investment amplify the impact of the global financial cycle on emerging markets?," Pacific-Basin Finance Journal, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:pacfin:v:89:y:2025:i:c:s0927538x2400341x
    DOI: 10.1016/j.pacfin.2024.102589
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    More about this item

    Keywords

    Benchmark indexes; Fund flows; Global financial cycle; Emerging markets;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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