Understanding Asian Equity Flows, Market Returns and Exchange Rates

49 Pages Posted: 16 Apr 2008

See all articles by Chayawadee Chai-Anant

Chayawadee Chai-Anant

affiliation not provided to SSRN

Corrinne Ho

Bank for International Settlements

Abstract

This paper examines from various angles foreign investors' daily transactions in six emerging Asian equity markets and their relationship with local market returns and exchange rate changes over the period 1999-2006. Confirming much of the literature, we find that equity market returns matter for net equity purchases, and vice versa. In addition, we find that while currency returns tend to show little influence over foreign investors' demand for Asian equities, net equity purchases do have some explanatory power over near-term exchange rate changes. Moreover, we find that foreign investors do quite often move in or out of multiple Asian markets simultaneously - but more so on the way in than on the way out. Nonetheless, during specific events of heightened market volatility, we observe some interesting deviations from the full-sample average relationships.

Keywords: Asian equity markets, foreign investor, market returns, currency returns, exchange rate

JEL Classification: F31, F32, F36, G12, G15

Suggested Citation

Chai-Anant, Chayawadee and Ho, Corrinne, Understanding Asian Equity Flows, Market Returns and Exchange Rates. BIS Working Paper No. 245, Available at SSRN: https://ssrn.com/abstract=1120293 or http://dx.doi.org/10.2139/ssrn.1120293

Chayawadee Chai-Anant (Contact Author)

affiliation not provided to SSRN ( email )

Corrinne Ho

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel, Basel-Stadt
Switzerland
00 41 61 280 9100 (Fax)

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