International Mutual Funds, Capital Flow Volatility, and Contagion-A Survey Gaston Gelos

ISBN: 9786613872630

Published: April 1st 2011

ebook

29 pages


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International Mutual Funds, Capital Flow Volatility, and Contagion-A Survey  by  Gaston Gelos

International Mutual Funds, Capital Flow Volatility, and Contagion-A Survey by Gaston Gelos
April 1st 2011 | ebook | PDF, EPUB, FB2, DjVu, audiobook, mp3, RTF | 29 pages | ISBN: 9786613872630 | 10.33 Mb

Gaining a better understanding of the behavior of international investors is key for informing the debate about the optimal response to capital flows and about reforms to the international financial architecture. In this context, recent research onMoreGaining a better understanding of the behavior of international investors is key for informing the debate about the optimal response to capital flows and about reforms to the international financial architecture.

In this context, recent research on the behavior of international mutual funds at the micro level has expanded our knowledge about the drivers of portfolio flows and the mechanisms behind the transmission of financial shocks across countries. This paper provides a brief survey of this literature, with a focus on the empirical evidence for emerging markets. Overall, the behavior of international mutual funds is complex and overly simplistic characterizations are misleading.

However, there is broad-based evidence for momentum trading among funds. Moreover, funds tend to avoid opaque markets and assets, and this behavior becomes more pronounced during volatile times. Portfolio rebalancing mechanisms are clearly important in explaining contagion patterns, even in the absence of common macroeconomic fundamentals. From a surveillance point of view, this implies that monitoring the exposures of large investors at a micro level is crucial to assess vulnerabilities.



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