Financial panic and emerging market funds

• Autores: Y. Jinjarak, H. Zheng
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 20, Nº. 22-24, 2010, págs. 1793-1805
• Idioma: inglés
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• Resumen

  • This article studies equity investment of emerging-market funds based on the 2003-2009 weekly data and compares the dynamics of flow and return between tranquil period and financial panic based on the experience of the latest 2008-2009 global financial crisis. First, we find that the well-documented positive feedback trading is a tranquil-period phenomenon such that it is more difficult in general for emerging-market funds to attract new investment in financial panic. Second, the predictive power of flow on return is driven by a combination of price pressure and information effects in tranquil period, while the information effect dominates in financial panic. Third, the underlying co-movements or contagion of flow across the emerging-market funds influence the association between flow and return. Overall, the findings highlight the importance of accounting for state-dependent dynamics as well as cross-regional co-movements in the analysis of flow and return.