Understanding Asian equity flows, market returns and exchange rates

Chayawadee Chai-Anant and Corinne Ho

No 245, BIS Working Papers from 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 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2008-02
New Economics Papers: this item is included in nep-fmk, nep-ifn and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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