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Global Risk and Portfolio Flows to Emerging Markets: Evidence from Irish-Resident Investment Funds

Author

Listed:
  • Bianchi, Benedetta

    (Central Bank of Ireland)

  • Galstyan, Vahagn

    (Central Bank of Ireland)

  • Herzberg, Valerie

    (Central Bank of Ireland)

Abstract
In this paper we analyse the behaviour of investment fund flows to emerging markets after the Global Financial Crisis (GFC). Our data points towards a structural growth in investment funds that purchase debt rather than equity securities. Empirically, we find that debt flows have higher sensitivity to global risk than equity flows, suggesting an increasing policy focus primarily on debt funds. We also show that Irish-resident funds’ sensitivity to changes in global risk sentiment co-varies negatively with a measure of sovereign credit rating of the receiving emerging market economy, a finding consistent with a notion that good fundamentals in host countries can mitigate outflows arising from swings in external funding conditions. Finally, we show that funds whose equity structure is tilted towards investors residing further away tend to invest less in countries than funds whose investors are closer to the same countries. This is noteworthy, given these results refer to Irish-resident investment funds that intermediate global financial flows.

Suggested Citation

  • Bianchi, Benedetta & Galstyan, Vahagn & Herzberg, Valerie, 2020. "Global Risk and Portfolio Flows to Emerging Markets: Evidence from Irish-Resident Investment Funds," Research Technical Papers 13/RT/20, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:13/rt/20
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    References listed on IDEAS

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    Cited by:

    1. Golden, Brian & Maqui, Eduardo, 2023. "How ‘special’ are international banks sponsoring Irish-resident SPEs?," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Investment Funds; Financial Flows; Emerging Markets; VIX.;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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