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Benchmark Effects from the Inclusion of Chinese A-shares in the MSCI EM index

Author

Listed:
  • Stefano Antonelli

    (Bank of Italy)

  • Flavia Corneli

    (Bank of Italy)

  • Fabrizio Ferriani

    (Bank of Italy)

  • Andrea Gazzani

    (Bank of Italy)

Abstract

We study the implications of benchmark indexing for emerging economies by focusing on the inclusion of Chinese A-shares in the MSCI EM index. Making use of a rich dataset on fund allocations and flows between 2015 and 2020, we document an escalating weight of Chinese exposure in mutual funds and an increasing concentration of fund portfolios. We rely on a Bayesian VAR model to show that the inclusion of A-shares in the MSCI EM index has fostered capital flows into China and has, at the same time, reduced the flows to the other emerging economies listed in the same index.

Suggested Citation

  • Stefano Antonelli & Flavia Corneli & Fabrizio Ferriani & Andrea Gazzani, 2021. "Benchmark Effects from the Inclusion of Chinese A-shares in the MSCI EM index," Questioni di Economia e Finanza (Occasional Papers) 657, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_657_21
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    References listed on IDEAS

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    Cited by:

    1. Corneli, Flavia & Ferriani, Fabrizio & Gazzani, Andrea, 2023. "Macroeconomic news, the financial cycle and the commodity cycle: The Chinese footprint," Economics Letters, Elsevier, vol. 231(C).
    2. Juan J. Cortina & Maria Soledad Martinez Peria & Sergio L. Schmukler & Jasmine Xiao, 2024. "The Internationalization of China’s Equity Markets," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(2), pages 554-610, June.
    3. Bank for International Settlements, 2021. "Changing patterns of capital flows," CGFS Papers, Bank for International Settlements, number 66, december.
    4. Li, Ping & Wang, Kai & Zhang, Junping, 2023. "Does the inclusion of Chinese A-shares in the MSCI EM index promote ESG performance?," Finance Research Letters, Elsevier, vol. 58(PB).
    5. Zhao, Panting & Yao, Xin & Shen, Rui, 2024. "Capital market internationalization and firms' ESG performance: Evidence from the inclusion of China A-shares in the MSCI Emerging Market Index," Energy Economics, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    benchmark indices; international portfolio flows; China;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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