Raddatz, ClaudioSchmukler, Sergio L.Williams, Tomas2014-05-142014-05-142014-05https://hdl.handle.net/10986/18337This paper studies channels through which well-known benchmark indexes impact asset allocations and capital flows across countries. The study uses unique monthly micro-level data of benchmark compositions and mutual fund investments during 1996-2012. Benchmarks have important effects on equity and bond mutual fund portfolios across funds with different degrees of activism. Benchmarks explain, on average, around 70 percent of country allocations and have significant impact even on active funds. Benchmark effects are important after controlling for industry, macroeconomic, and country-specific, time-varying effects. Reverse causality does not drive the results. Exogenous, pre-announced changes in benchmarks result in movements in asset allocations mostly when these changes are implemented (not when announced). By impacting country allocations, benchmarks affect capital flows across countries through direct and indirect channels, including contagion. They explain apparently counterintuitive movements in capital flows, generating outflows from countries when upgraded and with large market capitalization and better relative performance.en-USCC BY 3.0 IGOACCOUNTINGACTIVE MANAGEMENTACTIVE SHAREAGENCY PROBLEMSARBITRAGEASSET ALLOCATIONASSET ALLOCATIONSASSET CLASSASSET LIQUIDATIONASSET MANAGEMENTASSET MANAGERSASSET PRICESASSET PRICINGASSETS UNDER MANAGEMENTAVERAGE FUNDBALANCE OF PAYMENTSBASELINE RESULTSBEHAVIOR OF MUTUAL FUNDSBENCHMARKBENCHMARK ASSETBENCHMARK INDEXBENCHMARK INDEXESBENCHMARK PORTFOLIOBENCHMARK RETURNSBENCHMARKSBONDBOND FUNDSBOND INDEXESBOND INVESTORSBOND MARKETBOND MUTUAL FUNDBONDSCAPITAL ACCOUNTCAPITAL ALLOCATIONCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET FINANCINGCAPITAL MARKETSCAPITAL OUTFLOWSCENTRAL BANKCORPORATE GOVERNANCECORPORATE INVESTMENTCOUNTRY PORTFOLIOCOUNTRY PORTFOLIOSCOUNTRY RISKCREDIT MARKETCREDIT MARKETSCURRENCYDEAD FUNDSDEBTDERIVATIVEDEVELOPMENT POLICYDIVERSIFICATIONDOMESTIC MARKETSELASTICITYEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET FUNDSEMERGING MARKET INDEXESEMERGING MARKETSEQUITIESEQUITY BENCHMARKSEQUITY FUNDSEQUITY INDEXESEQUITY MUTUAL FUNDEQUITY MUTUAL FUNDSEXCHANGE RATEFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL CONTAGIONFINANCIAL CRISISFINANCIAL FRAGILITYFINANCIAL MARKETSFINANCIAL OPENNESSFINANCIAL SHOCKSFINANCIAL STUDIESFISCAL POLICYFOREIGN ASSETSFOREIGN INVESTORSFOREIGN PORTFOLIO INVESTMENTSFUND ASSETSFUND CHARACTERISTICSFUND FLOWSFUND MANAGERFUND MANAGERSFUND OUTFLOWSFUND RESEARCHGDPGDP PER CAPITAGLOBAL FINANCIAL STABILITYGLOBAL FUNDSGLOBAL INDEXGLOBAL MARKETGLOBALIZATIONGLOBALIZATION OF SECURITIESGROSS DOMESTIC PRODUCTGROUP OF FUNDSGROUPS OF FUNDSGROWTH RATEHOLDINGINCREASE IN FUND FLOWSINDEX FUNDSINDEX PORTFOLIOINDIVIDUAL FUNDSINDIVIDUAL SECURITIESINDIVIDUAL SECURITYINFLATIONINSTITUTIONAL INVESTORSINTERNATIONAL ASSETINTERNATIONAL ASSETSINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL DIVERSIFICATIONINTERNATIONAL ECONOMICSINTERNATIONAL EQUITYINTERNATIONAL FINANCEINTERNATIONAL FUNDSINTERNATIONAL INVESTMENTINTERNATIONAL INVESTMENTSINTERNATIONAL MUTUAL FUNDINTERNATIONAL MUTUAL FUNDSINTERNATIONAL PORTFOLIOINVESTINGINVESTMENT BEHAVIORINVESTMENT COMPANYINVESTMENT DECISIONSINVESTMENT STRATEGIESINVESTMENT STRATEGYINVESTMENT VEHICLESINVESTOR PSYCHOLOGYINVESTOR SENTIMENTIRRATIONAL EXUBERANCELEVYLIABILITYLIQUIDATIONLIQUIDITYMACROECONOMIC VARIABLESMACROECONOMICSMARKET CAPITALIZATIONMARKET CAPITALIZATIONSMARKET COUNTRYMARKET INDEXMARKET INDEXESMARKET INTEGRATIONMONETARY FUNDMONETARY POLICYMONEY MANAGERSMUTUAL FUNDMUTUAL FUND ASSETMUTUAL FUND INDUSTRYMUTUAL FUND INVESTMENTSMUTUAL FUND MANAGERSMUTUAL FUND PERFORMANCEMUTUAL FUND PERFORMANCE EVALUATIONMUTUAL FUND PORTFOLIOMUTUAL FUND PORTFOLIOSMUTUAL FUND STRATEGIESMUTUAL FUNDSNAVNEGATIVE SHOCKSNET ASSETNET ASSET VALUENET ASSETSNET RETURNNET RETURNSPASSIVE FUNDSPASSIVE INVESTMENTPERFORMANCE EVALUATIONPERFORMANCE MEASUREMENTPOLICY RESPONSESPOLITICAL ECONOMYPORTFOLIO ALLOCATIONPORTFOLIO ALLOCATIONSPORTFOLIO CHANGESPORTFOLIO CHOICEPORTFOLIO COMPOSITIONPORTFOLIO FLOWSPORTFOLIO HOLDINGSPORTFOLIO MANAGEMENTPORTFOLIO MANAGERPORTFOLIO WEIGHTPORTFOLIO WEIGHTSPRICE PRESSURESPRINCIPAL-AGENT PROBLEMSPROSPECTUSPUBLIC INFORMATIONREDEMPTIONSREGIONAL FUNDSRESERVE BANKRETAIL INVESTORSRETURNRETURNSRISK AVERSERISK AVERSIONRISK MANAGEMENTS&PSECURITIESSECURITIES MARKETSSECURITY MARKETSOPHISTICATED INVESTORSSTOCK MARKETSTOCK MARKET RETURNSSTOCK RETURNSTOCK RETURNSSTOCKSSYSTEMIC RISKTRADINGTRANSACTIONTRANSACTION COSTSTRANSPARENCYTREASURYTYPES OF FUNDSVALUATIONSVOLATILITY10.1596/1813-9450-6866