On the international transmission of shocks: Micro-evidence from mutual fund portfolios

Claudio Raddatz and Sergio Schmukler

Journal of International Economics, 2012, vol. 88, issue 2, 357-374

Abstract: Using micro-level data on mutual funds from different financial centers investing in equity and bonds, this paper analyzes how investors and managers behave and transmit shocks across countries. The paper shows that the volatility of mutual fund investments is quantitatively driven by both the underlying investors and fund managers through (i) injections into/redemptions out of each fund and (ii) managerial changes in country weights and cash. Both investors and managers respond to country returns and crises and adjust their investments substantially, e.g., generating large reallocations during the global financial crisis. Their behavior tends to be pro-cyclical, reducing their exposure to countries during bad times and increasing it when conditions improve. Managers actively change country weights over time, although there is significant short-run pass-through from returns to country weights. Capital flows from mutual funds do not seem to have a stabilizing role and expose countries in their portfolios to foreign shocks.

Keywords: Contagion; Crises; Global financial crisis; International capital flows; Mutual fund investors; Mutual fund managers (search for similar items in EconPapers)
JEL-codes: F32 F36 G11 G15 G23 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (145)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199612000967
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On the International Transmission of Shocks: Micro – Evidence From Mutual Fund Portfolios (2012)
Working Paper: On the International Transmission of Shocks: Micro-Evidence From Mutual Fund Portfolios (2012)
Working Paper: On the international transmission of shocks: micro-evidence from mutual fund portfolios (2012)
Chapter: On the International Transmission of Shocks: Micro-Evidence from Mutual Fund Portfolios (2011)
Working Paper: On the International Transmission of Shocks: Micro-Evidence from Mutual Fund Portfolios (2011)
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:eee:inecon:v:88:y:2012:i:2:p:357-374

DOI: 10.1016/j.jinteco.2012.05.006

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).