## Domestic and Foreign Mutual Funds in Mexico: Do They Behave Differently?

_IMF Working Papers, May 13, 2015_

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## Bibliographic details
- Authors: Jasmine Xiao
- Published: May 13, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475589542.001

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### Main findings
- The paper utilizes a new dataset of foreign and domestic mutual funds in Mexico to assess their behavior and obtains three new findings.
- First, foreign mutual funds are more sensitive to global financial conditions and engage more in herding and positive feedback trading than domestic mutual funds, notably during episodes of market stress.
- Second, the behavior of foreign funds differs substantially across types of funds: bond funds are more sensitive to global factors and engage more in positive feedback trading than equity funds; funds sold to retail investors, open-end funds, small funds, and regional funds also appear to be less stable sources of capital flows.
- Third, there is indicative evidence that foreign funds’ trading behavior is associated with higher local market volatilities, notably in periods of market stress; however, domestic mutual fund investors played some mitigating role.

### Heterogeneity across fund types and investor segments
- Bond funds (foreign) are more sensitive to global factors than equity funds (foreign) and engage more in positive feedback trading.
- Funds sold to retail investors appear to be less stable sources of capital flows.
- Open-end funds appear to be less stable sources of capital flows.
- Small funds appear to be less stable sources of capital flows.
- Regional funds appear to be less stable sources of capital flows.

### Market implications
- Foreign mutual funds’ trading behavior is associated with higher local market volatilities, notably in periods of market stress.
- Domestic mutual fund investors appear to have played some mitigating role on local market volatility.

*IMF Working Paper by Jasmine Xiao, May 13, 2015.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/domestic-and-foreign-mutual-funds-in-mexico-do-they-behave-differently-42935_