A Comparative Study On Sovereign Wealth Fund: Pre And Post Sub-Prime Crisis

The purpose of this research is to empirically analyze the influence of the financial crisis on the investment behavior of Sovereign Wealth Funds. Using 615 deals from 20 SWFs, a series of research are designed and conducted to compare the SWFs'governance, external environment, investment strategy and financial markets'feedback around the crisis. The paper finds that the recent financial crisis did not only bring SWFs heavy losses and the pressure to improve its image and governance structure, but also a precious opportunity of a better external environment by easing the nerves of the recipient country's government. Unlike in the pre-crisis, the investment strategies will be more positive, diversified and complementary to their own real economy. The event studies illustrate that financial markets turn to be more effective after the crisis. The market reaction to SWF's investment tends to mitigate speculative trading to a larger extent, which is shown by the lower cumulative abnormal return and turnover volatility.