Decomposing The Behavior Of Foreign Portfolio Investors: Evidence From China And India

There is an ongoing debate over the role that equity markets play in determining and influencing international equity flows. This paper describes the large portfolio equity flows into China and India, in order to understand the buying behavior of U.S. investors. The rapid growth of the Chinese and Indian economies, coupled with the recent development and liberalization of their financial markets have attracted significant portfolio investment from U.S. investors. The authors find that buying behavior of U.S. portfolio investors is significantly influenced by fundamental shocks.