What Drives International Portfolio Flows?

32 Pages Posted: 1 Apr 2015

See all articles by Lucio Sarno

Lucio Sarno

City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Ilias Tsiakas

University of Guelph

Barbara Ulloa

Central Bank of Chile

Date Written: March 30, 2015

Abstract

Understanding what drives international portfolio flows has important policy implications for countries wishing to exert some control on the size, direction and volatility of the flows. This paper empirically assesses the relative contribution of common (push) and country-specific (pull) factors to the variation of bond and equity flows from the US to 55 other countries. Using a Bayesian dynamic latent factor model, we find that more than 80% of the variation in bond and equity flows is due to push factors from the US to other countries. Hence global economic forces seem to prevail over domestic economic forces in explaining movements in international portfolio flows. The dynamics of push and pull factors can be partially explained by US and foreign economic fundamentals.

Keywords: International Portfolio Flows, Dynamic Factor Model, Push and Pull Factors.

JEL Classification: F21, G15

Suggested Citation

Sarno, Lucio and Tsiakas, Ilias and Ulloa, Barbara, What Drives International Portfolio Flows? (March 30, 2015). Available at SSRN: https://ssrn.com/abstract=2587146 or http://dx.doi.org/10.2139/ssrn.2587146

Lucio Sarno

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ilias Tsiakas (Contact Author)

University of Guelph ( email )

Department of Economics and Finance
University of Guelph
Guelph, Ontario N1G 2W1
Canada
5198244120 ext 53054 (Phone)
5197638497 (Fax)

HOME PAGE: http://www.uoguelph.ca/~itsiakas

Barbara Ulloa

Central Bank of Chile ( email )

Agustinas 1180
Santiago, 8340454
Chile

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