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Jinjarak, Yothin and Zheng, Huanhuan (2014) 'Granular Institutional Investors and Global Market Interdependence.' Journal of International Money and Finance, 46. pp. 61-81.

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Abstract

We study the propagation of global investment risk across markets through the granular view of institutional investors. Applying the conditional value-at-risk estimation to micro-level weekly observations of international mutual funds between 2003 and 2011, we find that idiosyncratic shocks to large institutional investors explain both aggregate market risk and cross-market risk interdependence. Conditional on the US capital markets being in financial distress, idiosyncratic shocks to the top 10% largest funds investing in the US explain about 40% of the risk fluctuations in other non-US markets. The findings are also economically and statistically significant for the top largest funds investing in non-US markets, with the effects becoming especially large during the global financial crisis of 2007–09. These results are robust after controlling for common risk factors and applying alternative measures of idiosyncratic shocks.

Item Type: Journal Article
SOAS Departments & Centres: Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management
Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management > Centre for Financial and Management Studies (CeFiMS)
ISSN: 0261-5606
DOI (Digital Object Identifier): https://doi.org/10.1016/j.jimonfin.2014.03.007
Date Deposited: 31 Mar 2014 14:00
URI: https://eprints.soas.ac.uk/id/eprint/18298

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