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Sovereign Wealth Funds and Financial Stability—An Event Study Analysis
Author: Mr. Heiko Hesse and Tao Sun
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 239
Language:
English
Publication Date:
01 Oct 2009
DOI:
https://doi.org/10.5089/9781451873863.001
ISBN:
9781451873863
ISSN:
1018-5941
Pages:
17
Keywords:
WP; sovereign wealth fund; investment; SWF investment
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines financial stability issues that arise from the increased presence of sovereign wealth funds (SWFs) in global financial markets by assessing whether and how stock markets react to the announcements of investments and divestments to firms by SWFs using an event study approach. Based on 166 publicly traceable events collected on investments and divestments by major SWFs during the period from 1990 to 2009, the paper evaluates the short-term financial impact of SWFs on selected public equity markets in which they invest. The impact is analyzed on different sectors (financial and nonfinancial), actions (buy and sell), market types (developed and emerging markets), and level of corporate governance (high and low score). Results, based on these 166 events, show that there was no significant destabilizing effect of SWFs on equity markets, which is consistent with anecdotal evidence.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund