Abstract

http://ssrn.com/abstract=1523628
 
 

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Asset Fire Sales and Purchases and the International Transmission of Funding Shocks


Chotibhak Jotikasthira


University of North Carolina Kenan-Flagler Business School

Christian T. Lundblad


University of North Carolina Kenan-Flagler Business School

Tarun Ramadorai


University of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance; Centre for Economic Policy Research (CEPR)

January 11, 2012

Journal of Finance Forthcoming
AFA 2011 Denver Meetings Paper

Abstract:     
We uncover a new channel through which shocks are transmitted across international markets. Investor flows to funds domiciled in developed markets force significant changes in their portfolio allocations to emerging markets. These forced trades affect equity prices, correlations between emerging markets, and the developed-market betas of emerging markets. These funding-driven fire sale effects are related to, but distinct from those arising purely from high fund holdings or high overlapping ownership of emerging markets in fund portfolios. A simple model and calibration exercise highlight the importance to these findings of 'push' effects from funds' domicile countries, and 'co-ownership spillover' between markets with overlapping fund ownership.

Number of Pages in PDF File: 82

Keywords: co-movement, contagion, international finance, mutual funds, asset fire sales

JEL Classification: F32, G12, G15

working papers series


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Date posted: December 16, 2009 ; Last revised: September 19, 2012

Suggested Citation

Jotikasthira, Chotibhak and Lundblad, Christian T. and Ramadorai, Tarun, Asset Fire Sales and Purchases and the International Transmission of Funding Shocks (January 11, 2012). Journal of Finance Forthcoming; AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1523628 or http://dx.doi.org/10.2139/ssrn.1523628

Contact Information

Chotibhak Jotikasthira
University of North Carolina Kenan-Flagler Business School ( email )
Chapel Hill, NC 27599-3490
United States

Christian T. Lundblad
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Tarun Ramadorai (Contact Author)
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 278 816 (Phone)
+44 1865 288 805 (Fax)
HOME PAGE: http://www.tarunramadorai.com
University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )
Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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