TY  - JOUR
AU  - Raddatz,Claudio
AU  - Schmukler,Sergio L.
TI  - On the International Transmission of Shocks: Micro-Evidence from Mutual Fund Portfolios
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17358
PY  - 2011
Y2  - August 2011
UR  - http://www.nber.org/papers/w17358
L1  - http://www.nber.org/papers/w17358.pdf
N1  - Author contact info:
Claudio Raddatz
Research Economist
World Bank, MSN3-301
1818 H Street, N.W.
Washington, DC 20433
Tel: 202/458-2145
E-Mail: craddatz@bcentral.cl

Sergio Schmukler
The World Bank
MSN MC3-301
1818 H Street, N.W.
Washington, DC 20433
Tel: 202-458-4167
Fax: 202-522-3518
E-Mail: Sschmukler@worldbank.org
M3  - presented at "Global Financial Crisis Conference", June 3-4, 2011
AB  - This paper uses micro-level data on mutual funds from different financial centers investing in equity and bonds to study how investors and managers behave and transmit shocks across countries. The paper finds that the volatility of mutual fund investments is driven quantitatively by both the underlying investors and fund managers through (i) injections/redemptions into each fund and (ii) managerial changes in country weights and cash. Both investors and managers respond to country returns and crises and adjust their investments substantially, for example, generating large reallocations during the global crisis. Their behavior tends to be pro-cyclical, reducing their exposure to countries during bad times and increasing it when conditions improve. Managers actively change country weights over time, although there is significant short-run pass-through from returns to these weights. Consequently, capital flows from mutual funds do not seem to have a stabilizing role and expose countries in their portfolios to foreign shocks.
ER  -