Sovereign Wealth Funds' investments and industry performance: Evidence from Europe

Sophie Bereau, Jean-Yves Gnabo, Malik Kerkour, Hélène RAYMOND

Research output: Contribution in Book/Catalog/Report/Conference proceedingChapter (peer-reviewed)peer-review

Abstract

In the past decade, sovereign wealth funds (SWFs) have been very active in western economies with massive liquidity injections and numerous stakes in various strategic areas. While a vast literature has documented their influence on firms’ behavior and equity valuation, their impact on the whole economy has been largely unexplored. This chapter investigates the aggregate impact of SWFs’ investments at the industrial level. Using a panel of ten European countries from 2006 to 2012, a relevant instrumental variables strategy is used to circumvent potential double causality between returns of the recipient countries’ stock market indices and SWFs’ investments. The results show a positive and significant impact of SWFs’ investments for five sectoral indices out of ten. Looking at conditional effects, it does not find that this relationship is affected by either the availability of alternative sources of financing in the economy—consistent with the liquidity argument—or different volatility regimes.
Original languageEnglish
Title of host publicationHandbook of Sovereign Wealth Funds
PublisherOxford University Press
Chapter18
DOIs
Publication statusPublished - 6 Nov 2017

Keywords

  • endogeneity
  • cross-border investment
  • nstrumental variable
  • industry-level analysis
  • sovereign wealth funds

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