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A Panic-Prone Pack? the Behavior of Emerging Market Mutual Funds

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  • Mr. Gaston Gelos
  • Mr. Eduardo Borensztein

Abstract

This paper explores the behavior of emerging market mutual funds using a novel database covering the holdings of individual funds over the period January 1996 to March 1999. An examination of individual crises shows that, on average, funds withdrew money one month prior to the events. The degree of herding among funds is statistically significant, but moderate. Herding is more widespread among open-ended funds than among closed-end funds, but not more prevalent during crises than during tranquil times. Funds tend to follow momentum strategies, selling past losers and buying past winners, but their overall behavior is more complex than often suggested.

Suggested Citation

  • Mr. Gaston Gelos & Mr. Eduardo Borensztein, 2000. "A Panic-Prone Pack? the Behavior of Emerging Market Mutual Funds," IMF Working Papers 2000/198, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/198
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    More about this item

    Keywords

    WP; fund; emerging market; investor; Mutual funds; contagion; emerging markets; foreign portfolio investment; herding; financial crises; emerging market funds; fund manager; open-ended fund; country funds; nonresident investor; funds overtime; offshore fund; investment strategies; investor behavior; Emerging and frontier financial markets; Stock markets; Stocks; Capital flows; Global; Asia and Pacific; Europe; Middle East;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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