Asset fire sales and purchases and the international transmission of financial shocks

Christian Lundblad and Chotibhak Jotikasthira
Authors registered in the RePEc Author Service: Tarun Ramadorai

No 7595, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We provide new evidence on the channels through which financial shocks are transmitted across international borders. Employing monthly data from 1996 to 2008 on over 1,000 developed country-domiciled mutual and hedge funds, we show that inflows and outflows experienced by these funds translate into significant changes in their portfolio allocations in 25 emerging markets. Despite funds' efforts to ameliorate the price impact of these portfolio allocation shifts, they substantially impact emerging market equity returns, and are associated with increases in co-movement between emerging and developed markets.

Keywords: Co-movement; Contagion; Hedge funds; International finance; Mutual funds (search for similar items in EconPapers)
JEL-codes: F32 G12 G15 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-cba and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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