TY - JOUR
T1 - Changes in the global investor base and the stability of portfolio flows to emerging markets
AU - Brandao-Marques, Luis
AU - Gelos, Gaston
AU - Ichiue, Hibiki
AU - Oura, Hiroko
N1 - Funding Information:
✰ We are grateful for helpful discussions with and comments from IMF colleagues. We also wish to thank participants in the 2014 Conference on Exchange Rates, Monetary Policy and Financial Stability in Emerging Markets and Developing Countries, the 2015 INFINITI Conference, and the 2017 Macroeconomic Conference in Tokyo, particularly our discussants, Christian Friedrich and Toyoichiro Shirota. We appreciate the editor and anonymous referees for their constructive comments and suggestions. The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF or IMF policy. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. The authors declare no conflicts of interest associated with this manuscript.
Publisher Copyright:
© 2022
PY - 2022/11
Y1 - 2022/11
N2 - The role of mutual funds in intermediating capital flows to emerging markets has grown, and the composition of types of funds has changed. Based on insights from the literature, we hypothesize that due to behavior of end investors, mutual fund flows are more sensitive to push- and pull factors when the assets held by funds are less liquid and the end investors are smaller, and when end investors can purchase or redeem funds more easily. Our empirical results based on fund-level asset allocation data across emerging markets are largely consistent with the hypotheses. Particularly, we find robust evidence that bond fund flows are more sensitive to pull- and push factors than equity fund flows. Since the share of fund types with higher sensitivities has tended to rise, the sensitivity of overall fund flows has likely increased. Our result also suggests that bond fund managers amplify selling pressure from end investors.
AB - The role of mutual funds in intermediating capital flows to emerging markets has grown, and the composition of types of funds has changed. Based on insights from the literature, we hypothesize that due to behavior of end investors, mutual fund flows are more sensitive to push- and pull factors when the assets held by funds are less liquid and the end investors are smaller, and when end investors can purchase or redeem funds more easily. Our empirical results based on fund-level asset allocation data across emerging markets are largely consistent with the hypotheses. Particularly, we find robust evidence that bond fund flows are more sensitive to pull- and push factors than equity fund flows. Since the share of fund types with higher sensitivities has tended to rise, the sensitivity of overall fund flows has likely increased. Our result also suggests that bond fund managers amplify selling pressure from end investors.
KW - Capital flows
KW - Emerging markets
KW - Mutual funds
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U2 - 10.1016/j.jbankfin.2022.106615
DO - 10.1016/j.jbankfin.2022.106615
M3 - Article
AN - SCOPUS:85134732747
SN - 0378-4266
VL - 144
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
M1 - 106615
ER -