Does the global fireman inadvertently add fuel to the fire? New evidence from institutional investors' response to IMF program announcements

Wei, Shang‐Jin; Zhang, Zhiwei; Du, Qingyuan

doi:10.1016/j.jimonfin.2010.01.007

Cited by 11 publications

(7 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…These data provide detail on security‐level holdings, but are limited to semi‐annual observations. Gelos and Wei (2005), Broner, Gelos, and Reinhart (2006), and Wei, Zhang, and Du (2010) also employ EPFR data. However, they analyze a much smaller time‐series and only employ monthly frequency data (see discussion below).…”

mentioning

confidence: 99%

Asset Fire Sales and Purchases and the International Transmission of Funding Shocks

Jotikasthira¹,

Lundblad²,

Ramadorai

2012

The Journal of Finance

386

180

View full text Add to dashboard Cite

We identify a new channel for the transmission of shocks across international markets. Investor flows to funds domiciled in developed markets force significant changes in these funds' emerging market portfolio allocations. These forced trades or “fire sales” affect emerging market equity prices, correlations, and betas, and are related to but distinct from effects arising purely from fund holdings or from overlapping ownership of emerging markets in fund portfolios. A simple model and calibration exercise highlight the importance to these findings of “push” effects from funds' domicile countries and “co‐ownership spillover” between markets with overlapping fund ownership.

show abstract

mentioning

confidence: 99%

Asset Fire Sales and Purchases and the International Transmission of Funding Shocks

Jotikasthira¹,

Lundblad²,

Ramadorai

2012

The Journal of Finance

386

180

View full text Add to dashboard Cite

show abstract

“…The third group of studies examines the relationship between fund flows and other variables. For instance, Wei, Zhang, and Du () examine international funds’ reactions to IMF program announcements and conclude that the Fund restored investor confidence during crises. Jinjarak et al () analyze the relationship between international portfolio flows and returns on equity and bond funds.…”

Section: Related Literaturementioning

confidence: 99%

“… See Hsieh, Tai, and Vu (), Wei et al (), Jinjarak et al (), Fratzscher (), Raddatz and Schmukler (), Yeyati and Williams (), Li et al (, ), and Puy (). …”

unclassified

Sudden stops of international fund flows: Occurrence and magnitude

Haan

Scholtens

2018

Rev International Economics

View full text Add to dashboard Cite

Using data of 65 economies from January 2000 (2008) to June 2015, we examine the covariates of sudden stops in fund equity and bond flows. Our results suggest that global, contagion and domestic factors are all related to the likelihood of sudden stops. For sudden stops in equity flows, global factors play a more important role in high‐income economies. For sudden stops in bond flows, global variables are the most important covariates in emerging economies, whereas domestic variables play a more important role in high‐income economies. We also find that global and contagion factors are correlated to the magnitude of sudden stops.

show abstract

“…In view of this, much of the relevant literature has been directed towards examining the stock market impact of IMF intervention on international financial institutions as well as on domestic financial institutions in the countries requesting IMF assistance. For example, Kho and Stulz (2000), Dong et al (2000), Lau and McInish (2003) and Wei et al (2010) examine whether the IMF’s intervention in a number of countries has restored or damaged confidence in domestic and international markets during the Asian, Mexican and Russian crises; however, they report results which are mixed and sometimes conflicting.…”

Section: Related Literaturementioning

confidence: 99%

The market impact of the involvement of the EU/ECB/IMF in crisis-affected countries during the European sovereign debt crisis

Kousenidis

2017

RAF

View full text Add to dashboard Cite

Purpose This paper aims to examine whether the release of news about policy interventions by the troika [European Union (EU)/the European Central Bank (ECB)/International Monetary Fund (IMF)] in the crisis-affected EU countries (Cyprus, Greece, Ireland, Italy, Portugal and Spain) and whether the policy responses of these countries’ governments had impacts on the return and risk of stocks in the financial and real-economy sectors of these countries. Design/methodology/approach The paper uses a broad set of news announcements concerning the troika authorities’ policy interventions and the policy responses of the affected Eurozone states’ governments. To test for the risk and return effects of these announcements during the crisis period, a set of regression equations is estimated under a difference-in-difference approach using intercept and slope dummy variables for news releases from troika authorities and from the national governments of the six EU countries. This enables unraveling the effects of the crisis (first difference) and the effects of news announcements (second difference). Findings The results indicate that the involvement of the troika managed to reverse some of the unfavourable market effects of the crisis. Moreover, the policy response of national governments was found to have stronger favourable effects in the markets of the affected countries implying that investors likely waited for the response of the national governments before they reacted to the policy actions of the troika. The simultaneous release of news from the troika and from national governments had adverse effects on the returns and risk of the firms in the real economy sectors, suggesting that cross-news announcements conveyed negative information in the markets. Originality/value The paper provides evidence on the effects of policy-related news announcements on the development of the recent sovereign debt crisis in Europe. This issue is highly important, as it can reveal the effectiveness of the IMF’s and EU authorities’ policy interventions in affected Eurozone member states during the first major crisis in Europe since the monetary union.

show abstract

Does the global fireman inadvertently add fuel to the fire? New evidence from institutional investors' response to IMF program announcements

Cited by 11 publications

References 18 publications

Asset Fire Sales and Purchases and the International Transmission of Funding Shocks

Asset Fire Sales and Purchases and the International Transmission of Funding Shocks

Sudden stops of international fund flows: Occurrence and magnitude

The market impact of the involvement of the EU/ECB/IMF in crisis-affected countries during the European sovereign debt crisis

Contact Info

Product

Resources

About