NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Offshore Investment Funds: Monsters in Emerging Markets?

Woochan Kim, Shang-Jin Wei

NBER Working Paper No. 7133
Issued in May 1999
NBER Program(s):   IFM

The 1997-99 financial crises in the emerging markets have brought to the foreground the concern about offshore investment funds and their possible role in exacerbating volatility in the markets they invest in. Offshore investment funds are alleged to engage in trading behaviors that are different from their onshore counterparts. Because their behavior is less moderated by tax consequences, and because they may be subject to less supervision and regulation, the offshore funds may trade more intensely. They could also pursue more aggressively certain trading strategies such as positive feedback trading or herding that could contribute to greater volatility in the market. Using a unique data set, we compare the trading behavior in Korea by offshore funds with that of their onshore counterparts registered in the United States and the United Kingdom. There are a number of interesting findings. First there is indeed evidence suggesting that the offshore funds trade more intensely than their onshore counterparts. Second, however, there is no evidence that the offshore funds engage in positive feedback trading. In contrast, there is strong evidence that the funds from the US and UK do so. Third, while offshore funds herd, they do so significantly less than the offshore funds from the US or UK. In sum, the offshore funds are not especially worrisome monsters.

download in pdf format
   (294 K)

email paper

This paper is available as PDF (294 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7133

Published: Kim, Woodchan and Shang-Jin Wei. "Offshore Investment Funds: Monsters In Emerging Markets?," Journal of Development Economics, 2002, v68(1,Jun), 205-224. citation courtesy of

Users who downloaded this paper also downloaded these:
Mankiw and Swagel w12398 The Politics and Economics of Offshore Outsourcing
Kaplan and Stromberg w14207 Leveraged Buyouts and Private Equity
Dharmapala and Hines w12802 Which Countries Become Tax Havens?
Cohen, Nelson, and Walsh w7552 Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)
Rose and Spiegel w12044 Offshore Financial Centers: Parasites or Symbionts?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us