After the Mexican, Asian, and Russian financial crisis, the phenomenon of
contagion became increasingly important. Existing studies indicate that various
explanations for the transmission of crises exist. This book gives an overview
over theories that try to explain contagion caused by portfolio flows of
international investors. Theories such as the occurrence of information cascades,
the effects of international portfolio diversification and optimization,
the importance of information asymmetries, cross-market re-balancing effects,
risk aversion, and wealth effects are discussed in detail. The analysis
suggests that information asymmetries and changes in risk aversion hold an
important role in explaining contagious sellouts. The book addresses itself to
economists, policy makers as well as portfolio and fund manager.