How ETFs Amplify the Global Financial Cycle in Emerging Markets

Since the early 2000s exchange-traded funds (ETFs) have grown to become an important investment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fundlevel data on investor flo...

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Autores principales: Converse, Nathan, Levy Yeyati, Eduardo, Williams, Tomas
Formato: Documento de trabajo publishedVersion
Lenguaje:Inglés
Publicado: Universidad Torcuato Di Tella 2024
Materias:
Finanzas Internacionales
Actividad bancaria y financiera
International finance
Banking and financial activity
Exchange-traded funds (ETFs)
Mutual funds
Global financial cycle
Global risk
Push and pull factors
Capital Flows
Emerging markets
Acceso en línea:https://repositorio.utdt.edu/handle/20.500.13098/13054
Aporte de:
Repositorio Digital Universidad Torcuato Di Tella de Universidad Torcuato Di Tella
id I57-R163-20.500.13098-13054
record_format dspace
spelling I57-R163-20.500.13098-130542024-09-27T07:00:17Z How ETFs Amplify the Global Financial Cycle in Emerging Markets Converse, Nathan Levy Yeyati, Eduardo Williams, Tomas Finanzas Internacionales Actividad bancaria y financiera International finance Banking and financial activity Exchange-traded funds (ETFs) Mutual funds Global financial cycle Global risk Push and pull factors Capital Flows Emerging markets Since the early 2000s exchange-traded funds (ETFs) have grown to become an important investment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fundlevel data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging market funds, we find that the sensitivity of investor flows to global risk factors for equity (bond) ETFs is 1.5 (1.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global risk factors. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the incidence of the global financial cycle in emerging markets. 2024-09-26T23:48:59Z 2024-09-26T23:48:59Z 2017-12 info:eu-repo/semantics/workingPaper info:eu-repo/semantics/publishedVersion https://repositorio.utdt.edu/handle/20.500.13098/13054 eng Documento de Trabajo. Universidad Torcuato Di Tella. Escuela de Gobierno info:eu-repo/semantics/openAccess https://creativecommons.org/licenses/by-sa/2.5/ar/ 52 p. application/pdf application/pdf Universidad Torcuato Di Tella Escuela de Gobierno
institution Universidad Torcuato Di Tella
institution_str I-57
repository_str R-163
collection Repositorio Digital Universidad Torcuato Di Tella
language Inglés
orig_language_str_mv eng
topic Finanzas Internacionales
Actividad bancaria y financiera
International finance
Banking and financial activity
Exchange-traded funds (ETFs)
Mutual funds
Global financial cycle
Global risk
Push and pull factors
Capital Flows
Emerging markets
spellingShingle Finanzas Internacionales
Actividad bancaria y financiera
International finance
Banking and financial activity
Exchange-traded funds (ETFs)
Mutual funds
Global financial cycle
Global risk
Push and pull factors
Capital Flows
Emerging markets
Converse, Nathan
Levy Yeyati, Eduardo
Williams, Tomas
How ETFs Amplify the Global Financial Cycle in Emerging Markets
topic_facet Finanzas Internacionales
Actividad bancaria y financiera
International finance
Banking and financial activity
Exchange-traded funds (ETFs)
Mutual funds
Global financial cycle
Global risk
Push and pull factors
Capital Flows
Emerging markets
description Since the early 2000s exchange-traded funds (ETFs) have grown to become an important investment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fundlevel data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging market funds, we find that the sensitivity of investor flows to global risk factors for equity (bond) ETFs is 1.5 (1.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global risk factors. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the incidence of the global financial cycle in emerging markets.
format Documento de trabajo
publishedVersion
author Converse, Nathan
Levy Yeyati, Eduardo
Williams, Tomas
author_facet Converse, Nathan
Levy Yeyati, Eduardo
Williams, Tomas
author_sort Converse, Nathan
title How ETFs Amplify the Global Financial Cycle in Emerging Markets
title_short How ETFs Amplify the Global Financial Cycle in Emerging Markets
title_full How ETFs Amplify the Global Financial Cycle in Emerging Markets
title_fullStr How ETFs Amplify the Global Financial Cycle in Emerging Markets
title_full_unstemmed How ETFs Amplify the Global Financial Cycle in Emerging Markets
title_sort how etfs amplify the global financial cycle in emerging markets
publisher Universidad Torcuato Di Tella
publishDate 2024
url https://repositorio.utdt.edu/handle/20.500.13098/13054
work_keys_str_mv AT conversenathan howetfsamplifytheglobalfinancialcycleinemergingmarkets
AT levyyeyatieduardo howetfsamplifytheglobalfinancialcycleinemergingmarkets
AT williamstomas howetfsamplifytheglobalfinancialcycleinemergingmarkets
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