The Information Content of International Portfolio Flows

42 Pages Posted: 19 Apr 2001

See all articles by Kenneth Froot

Kenneth Froot

National Bureau of Economic Research (NBER); Harvard Business School

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 4, 2001


This paper attempts to attribute the forecasting power of international portfolio flows for local equity market returns to either better information about fundamentals or price pressure. Price pressure is a potential explanation of the observed forecasting power because flows have positive contemporaneous price impact effects and are strongly positively autocorrelated. We find evidence that observed forecasting power is due predominately to information and only slightly due to price pressure in the foreign market. We control for country fundamentals by using closed-end fund prices, as traded in New York. Interestingly, the flows into the closed-end funds themselves (rather than the cross-border flows into the underlying NAVs) seem to forecast more negative returns in closed-end fund prices than in country NAVs. So while there is no apparent information in closed-end fund flows, there is some evidence that price pressure is present in closed-end fund prices.

Keywords: International investment, investor behavior, portfolio investment, portfolio flows

JEL Classification: G15, F21, G11

Suggested Citation

Froot, Kenneth and Ramadorai, Tarun, The Information Content of International Portfolio Flows (March 4, 2001). EFMA 2001 Lugano Meetings; HBS Finance Working Paper No. 03-006. Available at SSRN: or

Kenneth Froot (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Tarun Ramadorai

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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