Institutional Investors Allocation to Emerging Markets: a Panel Approach to Asset Demand

Bruno Bonizzi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents empirical evidence on the increasing allocation of institutional investors to emerging markets economies. It seeks to understand which factors are driving this increase, and how this relates to portfolio flows to such economies. By making use of the Emerging Portfolio Fund Research database, it estimates asset demand equations for emerging markets equities and bonds by institutional investors from advanced countries. These are estimated using recent advances in the panel autoregressive distributed lags models literature. Two key results emerge: balance sheet conditions of institutional investors and foreign exchange reserves in emerging markets affect asset allocation; secondly, quarterly returns matter for long-run asset allocations and the portfolio adjustment process is quick. These findings suggest that portfolio flows by institutional investors could still be procylical despit their more long-term horizon, and that additional variables should be monitored to ensure financial stability.

Keywords: Capital flows; emerging markets; institutional investors; Panel ARDL (search for similar items in EconPapers)
JEL-codes: F30 G11 G15 G23 (search for similar items in EconPapers)
Date: 2015-02-02
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/61784/1/MPRA_paper_61784.pdf original version (application/pdf)

Related works:
Journal Article: Institutional investors’ allocation to emerging markets: A panel approach to asset demand (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:61784

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