International equity flows and developing markets: the asian financial market crisis revisited

Abstract

This paper investigates the relationship between international equity flows and equity market returns for the eight largest emerging Asian markets. Basic findings include (1) minimal evidence of feedback trading, (2) identification of information dissemination for four of the eight countries with effects being short-term rather than long-term, (3) little evidence of significant volatility effects or significant crisis effect under feedback trading, and (4) strong evidence of significant volatility effects and significant crisis effects under information dissemination. Thus, stronger evidence of possible equity flow destabilization was found under the information dissemination rather than under the feedback trading hypothesis.