Are U.S. investors blindly chasing returns in foreign countries?

Liang Guo

International Review of Economics & Finance, 2016, vol. 41, issue C, 309-334

Abstract: This paper shows that the positive relation between U.S. cross-border flows and past foreign performance is observed in many stock markets but is ambiguous in bond markets. However, bond flows positively respond to past foreign stock returns. I argue that the importance of past foreign stock returns in driving U.S. investors' equity and bond flows is more likely because those returns reflect foreign fundamentals that are valuable to both U.S. equity and bond investors. I also provide additional evidences, which lead to my conclusion that U.S. investors' international trading is not simply driven by return chasing, but rather, foreign fundamentals.

Keywords: Cross-border fund flows; Return chasing; Informed investors (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:41:y:2016:i:c:p:309-334

DOI: 10.1016/j.iref.2015.08.002

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