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Does benchmark-driven investment amplify the impact of the global financial cycle on emerging markets?

Yang Chen, Yun Feng, Qing Liu and Zhipeng Zhang

Pacific-Basin Finance Journal, 2025, vol. 89, issue C

Abstract: This paper examines how the benchmark indexes affect the sensitivity of emerging markets cross-border fund flows to the global financial cycle. We find that benchmark-driven fund flows are more sensitive to the global financial cycle than non-benchmark-driven flows. The higher the penetration of benchmark-driven funds, the more fund flows are affected by global and domestic factors. Capital flow management policies can effectively dampen the impact of the global financial cycle on capital flows when the global financial cycle is at a low level.

Keywords: Benchmark indexes; Fund flows; Global financial cycle; Emerging markets (search for similar items in EconPapers)
JEL-codes: F32 G11 G15 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:89:y:2025:i:c:s0927538x2400341x

DOI: 10.1016/j.pacfin.2024.102589

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