International Asset Allocations and Capital FlowsThe Benchmark Effect

• 作 者: Claudio Raddatz Sergio L.Schmukler Tomás Williams
• 机 构: CentralBankofChileWorldBankHongKongInstituteforMonetaryResearchUniversitatPompeuFabra
• 出 处: Fourth Symposium on Emerging Financial Markets:China and Bey
• 发表日期: 2015年5期
• 关键词: Benchmark Indexes Contagion Coordination Mechanism ETFs International Asset Pric

　　We study different channels through which well-known benchmark indexes impact asset allocations,capital flows,and asset prices across countries,using unique monthly micro-level data of benchmark compositions and mutual fund investments during 1996-2014.Benchmarks are useful for identification and have important effects on equity and bond mutual fund portfolios,including both passive and active funds.Benchmark effects are important after controlling for industry,macroeconomic,and country-specific time-varying effects.Reverse causality and common shocks do not drive the results.Exogenous,pre-announced changes in benchmarks result in movements in asset allocations and capital flows mostly when these changes are implemented.Moreover,assets in the benchmarks experience abnormal returns when benchmark changes become effective,suggesting that the reallocations implied by those changes are not immediately arbitraged away.By impacting countryallocations,benchmarks explain apparently counterintuitive movements in capital flows and asset prices,for example,generating outflows and depressing pricesin countries being upgraded.