What moves international stock and bond markets?

Gino Cenedese () and Enrico Mallucci

No 1514, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: We study the relation between international mutual fund flows and the different return components of aggregate equity and bond markets. First, we decompose international equity and bond market returns into changes in expectations of future real cash payments, interest rates, exchange rates, and discount rates. News about future cash flows, rather than discount rates, is the main driver of international stock returns. This evidence is in contrast with the typical results reported only for the US. Inflation news instead is the main driver of international bond returns. Next, we turn to the interaction between these return components and international portfolio flows. We find evidence consistent with price pressure, short-term trend chasing, and short-run overreaction in the equity market. We also find that international bond flows to emerging markets are more sensitive to interest rate shocks than equity flows.

Keywords: International Capital Flows; Return Decomposition; International Equity Markets; International Bond Markets; Mutual Funds (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-06
New Economics Papers: this item is included in nep-fmk and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.centreformacroeconomics.ac.uk/Discussio ... MDP2015-14-Paper.pdf (application/pdf)

Related works:
Journal Article: What moves international stock and bond markets? (2016)
Working Paper: What moves international stock and bond markets? (2015)
Working Paper: What moves international stock and bond markets? (2015)
Working Paper: What moves international stock and bond markets? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1514

Access Statistics for this paper

More papers in Discussion Papers from Centre for Macroeconomics (CFM) Contact information at EDIRC.
Bibliographic data for series maintained by Helen Power ().