The Evidence and Impact of Financial Globalization

Chapter 9

International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey

G. Gelos

International Monetary Fund, Washington, DC, USA

Outline

Introduction

Portfolio Choice, Fund Managers’ Incentives, and Consequences for Capital Flows

Theoretical Considerations

Empirical Evidence

Aggregate patterns

Herding

Momentum trading

Portfolio rebalancing and contagion

Transparency, Informational Asymmetries, Asset Allocation, and Capital Flow Volatility

Transparency and Asset Allocation

Transparency and Volatility

Empirical Evidence

Conclusions

Acknowledgment

Glossary

References

Introduction

One salient feature of financial globalization has been the growth of international mutual funds. To a significant extent, this reflects the fact that investors ...