Foreign Investors Under Stress: Evidence from India
Ila Patnaik (),
Ajay Shah and
Nirvikar Singh ()
No 2013/122, IMF Working Papers from International Monetary Fund
Emerging market policy makers have been concerned about the financial stability implications of financial globalization. These concerns are focused on behavior under stressed conditions. Do tail events in the home country trigger off extreme responses by foreign investors – are foreign investors `fair weather friends'? In this, is there asymmetry between the response of foreign investors to very good versus very bad days? Do foreign investors have a major impact on domestic markets through large inflows or outflows – are they ‘big fish in a small pond’? Do extreme events in world markets induce extreme behavior by foreign investors, thus making them vectors of crisis transmission? We propose a modified event study methodology focused on tail events, which yields evidence on these questions. The results, for India, do not suggest that financial globalization has induced instability on the equity market.
Keywords: WP; event study methodology; FII flow; flat event study response; event study analysis; foreign investor; Event study; Extreme events; Foreign investors; event study approach; event study framework; Stock markets; Emerging and frontier financial markets; Exchange rates; Foreign direct investment; Capital controls; Global (search for similar items in EconPapers)
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Journal Article: Foreign Investors under Stress: Evidence From India (2013)
Working Paper: Foreign Investors Under Stress: Evidence from India (2012)
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