The Portfolio Flows of International Investors, I / Kenneth A. Froot, Paul G.J. O'Connell, Mark S. Seasholes.

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Froot, Kenneth A

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w6687.Publication details: Cambridge, Mass. National Bureau of Economic Research 1998.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: This paper explores the behavior of daily, international portfolio flows into and out of 46 countries from 1994 through 1998. Our data are from State Street Bank & Trust and encompass over 3 million trades by client institutions. We find a number of interesting facts. First, we detect regional factors within the flows. Second, the flows are strongly persistent -- the persistence decays only slowly over time. Third, flows are strongly influenced by past returns, so that investor trend-following is apparent. Fourth forecasting power for future emerging market returns, but not for developed country returns. Fifth, we find the sensitivity of local stock prices to foreign inflows to be positive and determine that transitory inflows impact future returns negatively. Finally, we examine and reject that the positive covariance of returns and inflows is associated with an information disadvantage on the part of international investors.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w6687 (Browse shelf(Opens below))	Not For Loan

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August 1998.

This paper explores the behavior of daily, international portfolio flows into and out of 46 countries from 1994 through 1998. Our data are from State Street Bank & Trust and encompass over 3 million trades by client institutions. We find a number of interesting facts. First, we detect regional factors within the flows. Second, the flows are strongly persistent -- the persistence decays only slowly over time. Third, flows are strongly influenced by past returns, so that investor trend-following is apparent. Fourth forecasting power for future emerging market returns, but not for developed country returns. Fifth, we find the sensitivity of local stock prices to foreign inflows to be positive and determine that transitory inflows impact future returns negatively. Finally, we examine and reject that the positive covariance of returns and inflows is associated with an information disadvantage on the part of international investors.