From taper tantrum to Covid-19: Portfolio flows to emerging markets in periods of stress

Fabrizio Ferriani

Journal of International Financial Markets, Institutions and Money, 2021, vol. 74, issue C

Abstract: We analyze flows to mutual funds investing in emerging markets during five episodes of market turmoil: the taper tantrum, the Chinese sell-off in 2015, the Trump presidential election, the 2018 emerging market sell-off, and the Covid-19 pandemic. We adopt an event-study methodology to show that investors triggered larger-than-expected negative abnormal flows in the aftermath of each event. These abnormal outflows are both statistically and economically significant, as they amount to several times the average net flows as a ratio to fund size. We find that abnormal outflows tend to be larger in the case of ETFs, funds being active for a longer period, and retail-suited funds, while funds with concentrated portfolios or with larger liquidity buffers have proved to be more resilient during a crisis.

Keywords: Mutual funds; Emerging markets; Stress episodes; Event study; Covid-19 (search for similar items in EconPapers)
JEL-codes: G01 G11 G14 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:74:y:2021:i:c:s1042443121001086

DOI: 10.1016/j.intfin.2021.101391

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