U.S. Mutual Fund Retail Investors in International Equity Markets: Is the Tail Wagging the Dog?

Jorge Chan-Lau and Li Ong

No 2005/162, IMF Working Papers from International Monetary Fund

Abstract: Do the dynamics of net flows to U.S. retail mutual funds affect equity returns in emerging markets? The question merits further examination since retail investors in mutual funds can exert a much greater degree of "control" over these funds via cash injections or redemptions at any time. A VAR analysis shows increased discrimination across emerging market regions after the Asian crisis as investors focused on individual regions rather than on emerging markets as a generic asset class. Crossover funds allocations also appear to affect emerging market returns. Furthermore, investment decisions by fund managers seem to be largely driven by retail investor allocations.

Keywords: WP; emerging market; equity fund; fund; mutual funds; retail investors; equity markets; dedicated funds; crossover funds; emerging market equity funds; equity fund investor; equities return; emerging markets equities; United States money markets; allocation behavior; emerging market securities; U.S. dollar; investor class; emerging market capitalization; Japan equities; investor allocation behavior; Emerging and frontier financial markets; Stock markets; Stocks; Money markets; Europe; Global; Asia and Pacific (search for similar items in EconPapers)
Pages: 22
Date: 2005-08-01
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Citations: View citations in EconPapers (1)

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