Dynamic relationships among equity flows, equity returns and dividends: Behavior of U.S. investors in China and India

Joseph French and Atsuyuki Naka

Global Finance Journal, 2013, vol. 24, issue 1, 13-29

Abstract: This research examines the linkages among U.S. equity flows to China and India, their equity returns, and their fundamental variables. We find that positive shocks to U.S. equity flows to China and India elicit an insignificant response to returns. This finding provides evidence that U.S. institutional investors are not a destabilizing influence in these markets. However, positive innovations to dividends in both China and India have a negative impact on returns. We conjecture that the high potential growth rates in these markets make it preferable for companies to retain earnings rather than pay dividends. In India, shocks to dividend yields have a strong negative influence on U.S. equity flows. Our results validate the need to take into account fundamental variables when examining U.S. investor behavior in emerging equity markets.

Keywords: Equity flows; Excess return; Dividends; Investor behavior; SVAR (search for similar items in EconPapers)
JEL-codes: F21 G11 G15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:1:p:13-29

DOI: 10.1016/j.gfj.2013.03.005

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