Uncertainty and international fund flows: A cross-country analysis

Joseph French, Seungho Shin, Constantin Gurdgiev and Atsuyuki Naka

International Review of Financial Analysis, 2024, vol. 94, issue C

Abstract: This paper investigates the impacts of uncertainty on international portfolio allocation decisions and returns across 27 countries. Using panel structural vector autoregressive analysis, a positive link between both country-level and global uncertainty with equity fund flows is uncovered, highlighting the role of investor sentiment in capital allocation decisions. Findings also support the portfolio rebalancing theory, revealing the negative influence of past returns on fund flows. Results show that the VIX demonstrates a positive association with fund flows, particularly during periods of elevated global uncertainty. Moreover, this research analyzes differences between developed and emerging markets in their sensitivity to uncertainty shocks.

Keywords: Fund flows; Capital flows; Economic policy uncertainty; Geopolitical risk; Portfolio rebalancing theory (search for similar items in EconPapers)
JEL-codes: C51 F38 G12 G15 G18 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:94:y:2024:i:c:s105752192400214x

DOI: 10.1016/j.irfa.2024.103282

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