6-Oct-08 Do flows forecast returns, and vice versa? The evidence from international bond and equity funds Yothin Jinjarak, Jon Wongswan, Huanhuan Zheng Abstract We examine monthly equity and bond funds data whether the cross-border flows can forecast local returns, and vice versa. Our main finding is that net inflows are associated with return declines. The effect of contemporaneous flows on returns is negative and significant. The results are applicable to both bond and equity flows, as well as to developed and emerging markets. Keywords: capital flows; asset returns; emerging markets JEL: E44; F37; G15 Yothin Jinjarak NTU Division of Economics S3-B2A-06 Singapore 639798 yjinjarak@ntu.edu.sg John Wongswan Barclays Global Investors 45 Fremont Street San Francisco, CA 94105 United States jon.wongswan@barclaysglobal.com Huanhuan Zheng NTU Division of Economics 50 Nanyang Avenue Singapore 639798 H070010@ntu.edu.sg