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Cross-border portfolio flows and media news coverage

This project investigates the dynamic linkages between portfolio flows and various news in- dices (based on both “positive” and “negative” news headlines collected from Bloomberg), whilst also controlling for a comprehensive set of push and pull factors. The monthly panel examined comprises 49 developed and developing countries in addition to the US (the “home economy”) and covers the period from January 2007 to October 2017; the econometric model includes fixed effects.

The empirical results document the important role played by the news variables. More specifically, news pessimism and intensity affect bond flows more than equity flows, and US news appears to play a leading role in these portfolio flow dynamics.

By contrast, changes in news pessimism and intensity have a more significant impact on equity flows, and again US news tend to have more sizeable effects. News sentiment is generally found to be an important driver of portfolio flows, whilst only US news disagreement has a significant effect, and only on bond inflows into the US. Most results are robust to the exclusion of the six financial centres from the full sample.

As for push and pull factors, most of them (equity return differentials, interest rate spreads, the VIX index, capital controls, exchange rate regimes, CDS spreads, QE episodes, financial development and commodity prices) are significant and with the expected signs.


Meet the Principal Investigator(s) for the project

Professor Guglielmo Maria Caporale - Guglielmo Maria Caporale is Professor of Economics and Finance, Divisional Lead for Economics and Econometrics, and Director of the Centre for Empirical Finance at Brunel University London. He is also a CESifo Research Network Fellow. Prior to taking up his current position, he was a Research Officer at the National Institute of Economic and Social Research in London; a Research Fellow and then a Senior Research Fellow at the Centre for Economic Forecasting at London Business School; Professor of Economics at the University of East London; Professor of Economics and Finance and Director of the Centre for Monetary and Financial Economics at London South Bank University (LSBU). He has also been Visiting Professor at both London Metropolitan University and LSBU, Research Professor at DIW Berlin and a NCID (Navarra Center for International Development) Non-Resident Fellow. He carries out editorial duties for various academic journals (including Journal of International Money and Finance, International Review of Economics and Finance, International Economics, Machine Learning with Applications, Journal of Economics and Finance) and has published extensively in leading academic journals such as Journal of International Money and Finance, Journal of Banking and Finance, Journal of Empirical Finance, Journal of Financial Markets, Institutions & Money, International Journal of Finance and Economics, European Journal of Finance, International Review of Financial Analysis, Economics Letters, Finance Research Letters, Journal of Time Series Analysis, Journal of Financial Econometrics, Oxford Bulletin of Economics and Statistics, Econometric Reviews, Journal of Forecasting, Journal of Economic Psychology, Review of International Economics, Canadian Journal of Economics, Journal of Macroeconomics, Quarterly Review of Economics and Finance, International Review of Economics and Finance, Empirical Economics, Journal of Economics and Finance and several others. Qualifications: Phd Economics (LSE) MSc Economics (LSE) Laurea (Politics, LUISS, Rome)

Related Research Group(s)

Empirical Finance

Empirical Finance - We use state-of-the-art econometrics to analyse issues with crucial business or policy implications, providing assistance to policy makers and market participants


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Project last modified 29/06/2021