Application of Gravity Framework to Bilateral Mutual Fund Flows in the Asia Pacific Region
| Authors | |
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| Year of publication | 2015 |
| Type | Article in Proceedings |
| Conference | European Financial Systems 2015: Proceedings of the 12th International Scientific Conference |
| MU Faculty or unit | |
| Citation | |
| Field | Management and administrative |
| Keywords | fund flows; gravity model; extensive and intensive margin; the AP5 |
| Description | Already for more than century investigation of allocation of international investment funds is a topic of considerable interest for both practitioners and academicians. To the former such investigation provides a useful aid for efficient diversification of their investment portfolios. To the latter identification of significance of impact of certain factors on international investment flows may provide a proof for violation of efficient market hypothesis, which, if found, will have far-reaching implications for the theory of finance. Despite being an innovative modern scheme for international investment allocation mutual funds still are puzzling from the viewpoint of factors, which determine the status of a particular fund or national fund industry to be or not to be attractive for international investment flows. Most of existing studies focus on effect which individual fund characteristics have on inducing of foreign and domestic capital to flow in or out of a particular mutual fund and there is an evident gap in knowledge about factors which determine the attractiveness of an individual economy and its mutual fund industry for international portfolio flows. In the light of the stated above the paper aims to study the determinants of mutual fund flows in advanced and emerging economies of the Asia Pacific region by means of portfolio flows gravity framework. Application of such framework gives a threefold result: (1) it allows to model simple gravity-type relations between country mutual fund industry characteristics and international portfolio flows in the Asian Pacific region; (2) it allows to analyze the changing structure of the regional mutual fund flows along two – intensive and extensive – margins; and (3) by decomposing the sample into advanced and emerging economies, it allows to track differences across development stages and document important country and regional characteristics. |
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