Raddatz, ClaudioSchmukler, Sergio L.2012-06-292012-06-292012-05https://hdl.handle.net/10986/9347Using micro-level data on mutual funds from different financial centers investing in equity and bonds, this paper analyzes how investors and managers behave and transmit shocks across countries. The paper shows that the volatility of mutual fund investments is quantitatively driven by investors through injections of capital into, or redemptions out of, each fund, and by managers changing the country weights and cash in their portfolios. Both investors and managers respond to returns and crises, and substantially adjust their investments accordingly. These mechanisms generated large capital reallocations during the global financial crisis. Their behavior tends to be pro-cyclical, reducing their exposure to countries experiencing crises and increasing it when conditions improve. Managers actively change country weights over time, although there is significant short-run "pass-through," meaning that price changes affect country weights. Consequently, capital flows from mutual funds do not seem to stabilize markets and instead expose countries to foreign shocks.CC BY 3.0 IGOACTIONS OF INVESTORSAGENCY PROBLEMSANNUAL FREQUENCIESARBITRAGEASSET ALLOCATIONASSET ALLOCATIONSASSET GROWTHASSET HOLDINGSASSET MANAGEMENTASSET POSITIONSASSET PRICESASSETSASSETS UNDER MANAGEMENTASYMMETRIC INFORMATIONBANK CREDITBANKING CRISESBEHAVIOR OF INVESTORSBEHAVIOR OF MANAGERSBEHAVIOR OF MUTUAL FUNDSBENCHMARKBENCHMARK INDEXESBENCHMARKSBONDBOND FUNDBOND FUNDSBOND INDEXBOND MARKETBOND MARKETSBOND MUTUAL FUNDSBONDSBROAD MARKET INDEXBUSINESS CYCLECAPITAL FLOWCAPITAL FLOWSCASH HOLDINGSCENTRAL BANKCLOSED-END FUNDSCOUNTRY PORTFOLIOCOUNTRY PORTFOLIOSCREDIT DEFAULTCREDIT DEFAULT SWAPCURRENCYCURRENCY CRISESCURRENCY CRISISDEBTDEPOSITDEPOSIT INSURANCEDEPOSITORSDEVELOPING COUNTRIESDIVERSIFICATIONDIVIDENDDIVIDEND PAYMENTSDOMESTIC FUNDSDOMESTIC MARKETSDUMMY VARIABLEDYNAMIC PANELEMERGING ECONOMIESEMERGING MARKETEMERGING MARKETSEQUITY FUNDEQUITY FUND ASSETSEQUITY FUND FLOWSEQUITY FUND MANAGERSEQUITY FUNDSEQUITY MARKETSEQUITY MUTUAL FUNDSEQUITY PRICEEQUITY PRICESEQUITY RETURNEQUITY RETURNSEXCHANGE RATESFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DISTRESSFINANCIAL INSTITUTIONSFINANCIAL SYSTEMFIXED INCOMEFIXED INCOME SECURITIESFOREIGN ASSETFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETSFOREIGN INVESTORSFOREIGN PORTFOLIO INVESTORSFUND ASSETFUND CAPITALFUND CHARACTERISTICSFUND MANAGERFUND NETFUND PERFORMANCEFUND PORTFOLIOFUND PRICEFUND PRICESFUND RETURNFUND RETURNSFUND TYPEFUND TYPESGLOBAL BONDGLOBAL EQUITY FUNDSGLOBAL FUNDSGLOBAL MARKETSGLOBAL MUTUAL FUNDSGROWTH OF ASSETGROWTH OF ASSETSGROWTH RATEGROWTH RATESHEDGE FUNDSIDIOSYNCRATIC RISKINDIVIDUAL FUNDINDIVIDUAL FUND RETURNSINSTITUTIONAL INVESTORSINTEREST RATESINTERNATIONAL BANKINTERNATIONAL BONDINTERNATIONAL CAPITALINTERNATIONAL DIVERSIFICATIONINTERNATIONAL ECONOMICSINTERNATIONAL EQUITYINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL CONTAGIONINTERNATIONAL FUNDSINTERNATIONAL INVESTMENTSINTERNATIONAL INVESTORSINTERNATIONAL MARKETSINTERNATIONAL MUTUAL FUNDSINTERNATIONAL PORTFOLIOINVESTINGINVESTMENT FUNDSINVESTMENT OPPORTUNITIESINVESTOR BEHAVIORLIQUIDATIONSLIQUIDITYLIQUIDITY RISKLONG-TERM INVESTMENTSMANAGEMENT COMPANYMARKET DISCIPLINEMARKET EFFICIENCYMARKET PARTICIPANTSMARKET VOLATILITYMATURITYMATURITY MISMATCHMATURITY TRANSFORMATIONMOMENTUM INVESTMENT STRATEGIESMOMENTUM TRADINGMORAL HAZARDMUTUAL FUNDMUTUAL FUND ASSETSMUTUAL FUND BEHAVIORMUTUAL FUND DATAMUTUAL FUND FAMILYMUTUAL FUND FLOWSMUTUAL FUND HERDINGMUTUAL FUND HOLDINGSMUTUAL FUND INVESTMENTMUTUAL FUND INVESTMENTSMUTUAL FUND INVESTORSMUTUAL FUND MANAGERSMUTUAL FUND NAMEMUTUAL FUND PORTFOLIOSMUTUAL FUND STRATEGIESMUTUAL FUNDSNAVNEGATIVE SHOCKSNET ASSETNET ASSET VALUENET ASSET VALUESNET ASSETSNET RETURNSNUMBER OF SHARESOLIGOPOLYOPEN-END FUNDSOPEN-END MUTUAL FUNDSOPTIMAL PORTFOLIOSPASSIVE FUNDSPOLITICAL ECONOMYPORTFOLIOPORTFOLIO ALLOCATIONSPORTFOLIO COMPOSITIONPORTFOLIO COMPOSITIONSPORTFOLIO HOLDINGSPORTFOLIO PERFORMANCEPORTFOLIO WEIGHTPORTFOLIO WEIGHTSPOSITIVE FEEDBACKPRICE CHANGESPRICE DISCOVERYPRINCIPAL-AGENT PROBLEMSPROSPECTUSRATE OF RETURNSRATES OF RETURNSREDEMPTIONREDEMPTIONSREGIONAL FUNDSREPORESERVE BANKRETURNRETURN DATARETURN DIFFERENTIALSRETURN VARIABILITYRETURNSRISK MEASURESRISK TAKINGROBUSTNESS CHECKSS&PSOPHISTICATED INVESTORSSOVEREIGN BONDSTOCK INDICESSTOCK MARKETSTOCK MARKET INDEXESSTOCK MARKETSSTOCK PRICESTOCK PRICESSYSTEMIC RISKTRANSPARENCYTYPES OF FUNDSVALUATIONVALUATION CHANGESVOLATILITYWEALTH EFFECTSWorld Bank10.1596/1813-9450-6072