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International Investment Performance: Evidence from Institutional Investors’ Foreign Equity Holdings

Timmermann, A. and Blake, D. ORCID: 0000-0002-2453-2090 (2000). International Investment Performance: Evidence from Institutional Investors’ Foreign Equity Holdings (PI-0008). London, UK: Pensions Institute.

Abstract

This paper analyzes the international equity holdings of a large panel of UK pension funds. We find considerable evidence of market timing activity, as illustrated by the funds’ decision to scale back their investments in the US stock market during the 1990s. To explain this we jointly model time-varying conditional moments and portfolio weight dynamics. Past returns do not adequately explain the funds’ international portfolio flows and only matter for the short run. Instead we find that a substantial part of the evolution in portfolio weights is explained by time-varying conditional expected returns, volatilities and covariances with domestic equity returns. However, once we control for publicly known state variables, there is no evidence of extra-market timing skills and most funds appear to have earned small but negative returns from international market timing.

Publication Type: Monograph (Discussion Paper)
Subjects: H Social Sciences > HG Finance
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Departments: Business School > Finance
Date Deposited: 26 Jun 2020 11:24
URI: https://openaccess.city.ac.uk/id/eprint/24411
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