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Asset Fire Sales and Purchases and the International Transmission of Financial ShocksPab JotikasthiraUniversity of North Carolina Kenan-Flagler Business School Christian T. LundbladUniversity of North Carolina Kenan-Flagler Business School Tarun RamadoraiUniversity of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance; Centre for Economic Policy Research (CEPR) December 2009 CEPR Discussion Paper No. DP7595 Abstract: We provide new evidence on the channels through which financial shocks are transmitted across international borders. Employing monthly data from 1996 to 2008 on over 1,000 developed country-domiciled mutual and hedge funds, we show that inflows and outflows experienced by these funds translate into significant changes in their portfolio allocations in 25 emerging markets. Despite funds' efforts to ameliorate the price impact of these portfolio allocation shifts, they substantially impact emerging market equity returns, and are associated with increases in co-movement between emerging and developed markets.
Number of Pages in PDF File: 57 Keywords: co-movement, contagion, hedge funds, international finance, mutual funds JEL Classification: F32, G12, G15 working papers seriesDate posted: January 11, 2010Suggested CitationContact Information
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