Mutual Fund Investment in Emerging Markets: An Overview
Posted: 7 May 2002
International mutual funds are key contributors to the globalization of financial markets and one of the main sources of capital flows to emerging economies. Despite their importance in emerging markets, little is known about their investment allocation and strategies. This paper provides an overview of mutual fund activity in emerging markets. First, we describe their relative size, asset allocation, and country allocation. Second, we focus on funds' behavior during emerging markets crises in the 1990s, analyzing data at both the fund-manager and fund-investor levels. Due to large redemptions and injections, funds' flows are not stable. Withdrawals from emerging markets during recent crises were large, which is consistent with existing evidence of financial contagion.
Keywords: mutual funds, emerging markets, capital flows, equity investment, contagion, crises
JEL Classification: F3, G1, G2
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