NIPFP Working Paper 104
[PDF]
Sudipto Mundle, Pinaki Chakraborty, Samik Chowdhury, and Satadru Sikdar
July 2012
[PDF]
Sudipto Mundle, Pinaki Chakraborty, Samik Chowdhury, and Satadru Sikdar
July 2012
Tuesday, July 31, 2012
Monday, July 2, 2012
Foreign Investors under Stress: Evidence from India
NIPFP Working Paper 103
[Link]
Ila Patnaik, Ajay Shah and Nirvikar Singh
June 2012
Abstract
Emerging market policy makers have been concerned about the financial stability implications of financial globalisation. These concerns are focused on behaviour under stressed conditions. Do tail events in the home country trigger off extreme responses by foreign investors – are foreign investors `fair weather friends'? In this, is there asymmetry between the responses of foreign investors to very good versus very bad days? Do foreign investors have a major impact on domestic markets through large inflows or outflows – are they ‘big fish in a small pond’? Do extreme events in world markets induce extreme behaviour by foreign investors, thus making them vectors of crisis transmission? We propose a modified event study methodology focused on tail events, which yields evidence on these questions. The results, for India, do not support the skeptical perspective on financial globalisation.
[Link]
Ila Patnaik, Ajay Shah and Nirvikar Singh
June 2012
Abstract
Emerging market policy makers have been concerned about the financial stability implications of financial globalisation. These concerns are focused on behaviour under stressed conditions. Do tail events in the home country trigger off extreme responses by foreign investors – are foreign investors `fair weather friends'? In this, is there asymmetry between the responses of foreign investors to very good versus very bad days? Do foreign investors have a major impact on domestic markets through large inflows or outflows – are they ‘big fish in a small pond’? Do extreme events in world markets induce extreme behaviour by foreign investors, thus making them vectors of crisis transmission? We propose a modified event study methodology focused on tail events, which yields evidence on these questions. The results, for India, do not support the skeptical perspective on financial globalisation.
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