On the International Transmission of Shocks : Micro-Evidence from Mutual Fund Portfolios

By Claudio E. Raddatz, S. Schmukler. 2012

194 citations recorded by the source corpus.

This paper uses micro-level data on mutual funds from different financial centers investing in equity and bonds to study how investors and managers behave and transmit shocks across countries. The paper finds that the volatility of mutual fund investments is driven quantitatively by both the underlying investors and fund managers through (i) injections/redemptions into each fund and (ii) managerial changes in country weights and cash. Both investors and managers respond to country returns and crises and adjust their investments substantially, for example, generating large reallocations during the global crisis. Their behavior tends to be pro-cyclical, reducing their exposure to countries during bad times and increasing it when conditions improve. Managers actively change country weights over time, although there is significant short-run pass-through from returns to these weights. Consequently, capital flows from mutual funds do not seem to have a stabilizing role and expose countries in their portfolios to foreign shocks.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/7bd4c1a41329846779c3e53fcff2c5f3c0c6e784

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Citations in the corpus

On the International Spillovers of US Quantitative Easing (2018, unknown): “Moreover, due to 13 Other papers using the EPFR dataset are Forbes et al. (2012), Lo Duca (2012) and Raddatz and Schmukler (2012).”
Control of corruption, international investment, and economic growth – Evidence from panel data (2018, background): “…ambiguous effect on the overall world’s investment position (investments over wealth), they might cause large movements of capital across countries if the world economy is sufficiently open and international investors are diversified against other types of country risks (Raddatz & Schmukler, 2012).”
How Important is the Global Financial Cycle? Evidence from Capital Flows (2017, background): “Passari, E and H Rey (2015): “Financial flows and the international monetary system”, Economic Journal, 125, pp 675–98. Prachi, M, K Moriyama, P N’Diaye and L Nguyen (2014): “Impact of Fed tapering announcements on emerging markets”, IMF Working Papers, no WP/14/109.”
The “Big C”: identifying and mitigating contagion (2012, background): “26 For evidence, see Fratzscher (2009) and Raddatz and Schmukler (2012).”
How Resilient and Countercyclical Were Emerging Economies to the Global Financial Crisis? (2012, unknown): “See also Kaminsky and Reinhart (2000) and Martinez Peria et al. (2005) on the role of banks; Borensztein and Gelos (2003), Kaminsky et al. (2004b), Broner et al. (2006), and Raddatz and Schmukler (2012) on the role of mutual funds, among many others.”