Global volatility and firm-level capital flows
File(s)
Published version
Author(s)
Kacperczyk, Marcin
Nosal, Jaromir
Wang, Tianyu
Type
Journal Article
Abstract
We study the impact of global volatility on the equity portfolio flows of institutional investors worldwide. Aggregate equity allocations of institutional investors decrease during periods of high volatility, both in developed and, even more strongly, in emerging markets. Our granular portfolio-level data allows us to uncover disaggregated investor responses that are an order of magnitude larger than aggregate estimates, and are dominated by discretionary (investor-driven) component of flows. We further show that periods of high volatility are associated with portfolio rebalancing by institutional investors from small-cap to large-cap stocks. Finally, institutional flows have significant impact on future firm stability, measured by their volatility and liquidity. Our findings are consistent with the economic mechanism in which investors with heterogeneous information capacity are learning about assets with different information rents.
Date Issued
2025-07-01
Date Acceptance
2025-04-12
Citation
Journal of Financial Economics, 2025, 169
ISSN
0304-405X
Publisher
Elsevier
Journal / Book Title
Journal of Financial Economics
Volume
169
Copyright Statement
© 2025 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
License URL
Publication Status
Published
Article Number
104078
Date Publish Online
2025-04-30