Flow data

Our flow data differ in a number of respects from those used in previous studies. The data are derived from (and are proprietary to) State Street Bank & Trust (SSB). SSB is the largest US master trust custodian bank, the largest US mutual fund custodian (with nearly 40% of the industry’s funds under custody), and one of the world’s largest global custodians. It has over $4.0 trillion of assets under custody. SSB records all transactions in the securities they hold in custody. From this database we distinguish cross-border transactions by the currency in which the transactions are settled. For example, transactions that are settled in Thai baht encompass purchases and sales of Thai equities and baht-denominated debt by SSB clients. To produce our data, SSB has extracted all transactions that settle in baht, and removed from them any transactions initiated by Thai investors. Our measure of cross-border flows is therefore that of transactions by non-local SSB clients in local securities.

The data identify daily cross-border flows for 46 countries—18 developed countries and 28 emerging markets.10 There are over $845 billion in equity purchases and sales. The data separately track daily purchases and sales of both equities and local-currency debt. For each country we have the dollar value of these four measures plus the number of transactions each day. Link The data begin on August 1, 1994 and continue through May 15, 1998.

Since these data use the market of settlement as a reference point, they differ in a number of ways from data used in previous studies.11 Other work uses data from the US Treasury, which reports equity and debt purchases by US entities with non-US entities on a quarterly basis. In addition to the higher frequency of our data, the Treasury data may also miss or misreport the transactions of foreign-based firms or intermediaries trading on behalf of US investors.

Consider, for example, a US mutual fund family that has received a deposit into one of its international stock funds.12 If this fund purchases foreign equity directly, then the purchase is reflected in the Treasury accounts. But if the mutual fund transfers the deposit to its affiliate in London, which in turn executes the equity transactions, then the Treasury data will miss the equity purchase. Furthermore, the data may also misidentify the country receiving the inflow. In this example, the inflow from the Treasury’s perspective is into the UK, even if the ultimate shares are purchased in other countries.