International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey
IMF Working Papers, April 1, 2011
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- International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey
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Bibliographic details
- Authors: Gaston Gelos
- Published: April 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455253319.001
Overview
- Purpose: Survey recent micro-level research on the behavior of international mutual funds with a focus on empirical evidence for emerging markets.
- Central premise: Understanding international investors’ behavior is key for informing debate about optimal responses to capital flows and reforms to the international financial architecture.
- Scope emphasis: Drivers of portfolio flows and mechanisms behind transmission of financial shocks across countries.
Key findings from the literature
- Behavior complexity:
- "The behavior of international mutual funds is complex and overly simplistic characterizations are misleading."
- Trading patterns:
- "There is broad-based evidence for momentum trading among funds."
- Market selection and opacity:
- "Funds tend to avoid opaque markets and assets, and this behavior becomes more pronounced during volatile times."
- Contagion mechanisms:
- "Portfolio rebalancing mechanisms are clearly important in explaining contagion patterns, even in the absence of common macroeconomic fundamentals."
- Surveillance implication:
- "Monitoring the exposures of large investors at a micro level is crucial to assess vulnerabilities."
Implications for surveillance and policy
- Surveillance priority:
- Monitor exposures of large international investors at a micro level to assess vulnerabilities arising from fund behavior.
- Policy relevance:
- Recognize that portfolio rebalancing and investor behavior can transmit shocks across countries independently of common macroeconomic fundamentals.
- Account for increased avoidance of opaque markets and assets by funds during volatile periods when designing market openness and transparency policies.
- Reform considerations:
- Use micro-level evidence on mutual funds to inform debates on optimal response tools to capital flows and on reforms to the international financial architecture.
Research focus and target topics
- Subjects highlighted: Emerging and frontier financial markets, Mutual funds, Securities markets, Stock markets, Stocks.
- Keywords: emerging market, equity fund, fund, mutual fund, WP.
Source: International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey by Gaston Gelos, IMF Working Papers, April 1, 2011.
Content in this bundle
- Microsoft Word - Final WP_Mutual Funds_4-2011.docx