Description |
1 online resource (34 pages) |
Series |
IMF working paper ; no. WP/04/131 |
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IMF working paper ; WP/04/131.
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Contents |
""Contents""; ""I. INTRODUCTION""; ""II. MODEL""; ""A. Demand""; ""B. Inelastic Supply""; ""C. Elastic Supply""; ""D. Model Predictions""; ""III. DATA""; ""IV. PORTFOLIO DISPERSION OVER TIME""; ""V. FUND PERFORMANCE AND PORTFOLIO CHOICE""; ""VI. A MEASURE OF FINANCIAL INTERDEPENDENCE""; ""VII. FINANCIAL INTERDEPENDENCE AND CONTAGION""; ""VIII. CONCLUSIONS""; ""FUND PERFORMANCE AND REDEMPTIONS""; ""PORTFOLIO ADJUSTMENT REGRESSIONS WITH CONTROL VARIABLES""; ""EQUIVALENCE OF INDICES OF INTERDEPENDENCE""; ""REFERENCES"" |
Summary |
One plausible mechanism through which financial market shocks may propagate across countries is through the effect of past gains and losses on investors' risk aversion. We first present a simple model on how heterogeneous changes in investors' risk aversion affect portfolio decisions and stock prices. Second, we empirically show that, when funds' returns are below average, they adjust their holdings toward the average (or benchmark) portfolio. In other words, they tend to sell the assets of countries in which they were "overweight," increasing their exposure to countries in which they were "underweight." Based on this insight, we construct a matrix of financial interdependence reflecting the extent to which countries share overexposed funds. This index can improve predictions about which countries are likely to be affected by contagion from crisis centers |
Bibliography |
Includes bibliographical references |
Notes |
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL |
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digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL |
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Print version record |
Subject |
Financial crises -- Econometric models
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Risk -- Econometric models
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Mutual funds -- Econometric models
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Financial crises -- Econometric models
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Mutual funds -- Econometric models
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Risk -- Econometric models
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Form |
Electronic book
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Author |
Gelos, Gaston, author.
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Reinhart, Carmen M., author.
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International Monetary Fund. Western Hemisphere Department, issuing body.
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ISBN |
1282050931 |
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9781282050938 |
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9781451855319 |
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1451855311 |
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9781451900583 |
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1451900589 |
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